It has become quiet around the former energy giant Eon. The Dax group has almost no more large power plants, its last nuclear reactor is due to cease operations next year. Instead, Eon mainly operates networks – and sells electricity and gas to millions of people in Europe. On the stock exchange, Essen is still Germany’s most valuable supplier. But the share price has hardly moved in the past few years, despite all the other stock market records.
On Tuesday, Leonhard Birnbaum started to change that. The 54-year-old, who prefers to call himself Leo, has been at the top of Eon since April. Birnbaum has now invited investors to the Capital Markets Day, an event that aims to advertise the company and its shares. However, the stock market price on this day also suggests that this was not entirely successful.
Leonhard Birnbaum, known as Leo: The native of the Palatinate, who has a doctorate in engineering, has been a member of the Eon Board of Directors since 2013.
(Photo: Ina Fassbender / dpa)
The CEO says: “We are facing unprecedented growth opportunities.” Eon has already connected around a million wind and solar systems to its regional grids. And the number should increase the more climate-damaging large power plants are taken off the grid. At the same time, many people are likely to need more electricity in the future: after all, electric cars should replace combustion engines, electricity-driven heat pumps displace gas and oil heating systems, and data centers also need energy. “We have entire industries that are moving in our direction,” says Birnbaum.
Eon will therefore invest 27 billion euros by 2026. That is more than previously announced. The majority of the money is to flow into the regulated network business, a smaller amount in the competitive business with private individuals and corporate customers. His group will not only build additional lines, says Birnbaum, but also upgrade transformer stations or expand substations, for example.
Consumers pay for the returns
One should know that regional electricity and gas networks are so-called natural monopolies: Companies like Eon operate certain parts of the network, in return they receive interest on the capital employed. The Federal Network Agency sets these returns in such a way that, although operators have an incentive to expand, consumers should not be excessively burdened either. After all, the general public pays this interest through the network charges.
The network agency recently decided that the return should decrease in the next few years. The authority refers to the generally low interest rates. Eon now calls the definition disappointing and flawed. “That is why we have decided to take legal action against the decision of the German regulatory authority,” says board member Thomas König. It will be a few years before the courts have ruled on this profit maker, which is important for Eon.
The Federation of German Consumer Organizations (VZBV) criticizes the move. Although the network agency set the rate of return higher than originally proposed, for some it is still not enough, complains Thomas Engelke, energy expert at VZBV: “It’s about billions of euros – at the expense of private households.”
Meanwhile, Eon also promises investors growth in sales. Here the hope rests on solar systems, battery storage or charging points for electric cars, which Eon wants to sell to private individuals and other companies.
The group has specialized significantly in recent years: In 2016, it floated its gas and coal-fired power plants in the independent company Uniper. In 2018, Eon took over the network and sales business of the RWE subsidiary Innogy; In return, the international business with wind and solar parks was handed over to the old rival RWE.
Overall, Eon has announced that it will cut costs by around 500 million euros over the next few years. Birnbaum does not want to quantify on Tuesday whether this should go hand in hand with further job cuts. One thing is certain, however: the shareholders are to receive a dividend of 49 cents per share in the coming year, two cents more than last.
Nevertheless, the group temporarily lost four percent of its value on the stock exchange on Tuesday. This is a reaction that stock corporations would like to avoid on their capital market day. But the event did not bring any surprises, complain about the analysts of the major Swiss bank UBS. Eon announced surprisingly high investments, but the promised profits were not higher than the level that investors had expected anyway. And Birnbaum did not present an aggressive program to reduce costs. It is not easy, this Tuesday shows, to inspire analysts.