German utility Eon posts FY profit of $3.4 billion

March 13, 2013 - 4:28 AM

FRANKFURT, Germany (AP) — German utility Eon bounced back to profit in 2012 but warned that it may have to start closing gas-fired power plants if government doesn't take steps to ensure they can make a profit.

CEO Johannes Teyssen said that the company's generating plants using natural gas are "barely profitable," threatening important generating capacity needed for the stability of the power system.

"Politicians need to act swiftly on this issue," he said in a statement. "Otherwise we're going to have to shut down power plants."

Gas-fired electricity plants have seen their profitability disappear for several reasons. Europe's recession means weaker demand for power; meanwhile a collapse in demand for emissions permits under the European Union carbon trading program helps make it cheaper to use coal. Eon said ever greater amounts of electricity from renewable sources reduce the value of conventional generating assets.

Eon said Wednesday it made €2.64 billion ($3.4 billion) in net profit last year as the company left behind the expense of Germany's exit from nuclear power.

The company showed a loss of €1.86 billion for 2011 after Chancellor Angela Merkel's government decided in the wake of Japan's nuclear disaster to immediately shut down eight of Germany's 17 nuclear reactors and phase out the rest earlier than planned. Eon took a large hit to earnings from shutdown expenses.

The company also credited sales growth in emerging markets Turkey, Russia and Brazil and ongoing cost cutting for the better result. Still, the company's electricity business has lagged, with sales flat and weak demand in recession-hit Europe.

The company's 2012 sales revenues rose 5 percent to €132.1 billion.