Write-downs of billions of Euro for power plants and gas storage facilities of Uniper lead to losses for Eon. Political plans for exiting coal and nuclear exacerbate the challenges.
In the first half-year of 2016 Eon depreciated the value of power plants and gas storage facilities of its power plant and trading subsidiary Uniper by 3.8 billion Euro. The subsidiary Uniper is to be separated from Eon soon and caused losses of about 3 billion Euro to the group during the first sixth months of 2016. Uniper’s net asset value is currently only estimated to be 12 billion Euro, while the report presented during the decision for splitting the company in April estimated a net value of about 15.5 billion Euro (Montel).
The write-downs on Uniper’s European power plants in the amount of 1.8 billion Euro are primarily due to the exit from coal, or at least the reduction of power generation from coal in the UK, France and the Netherlands, CEO Johannes Teyssen explains. According to current plans, coal-fired power generation will be history in the UK by 2025. Plans for the introduction of a national minimum price for CO2 in France also increase the pressure on power generation from coal as a way to reduce CO2-emissions (Montel).
Therefore the months to come will prove to be difficult times: Eon also has to provide billions of Euro for the decommissioning its nuclear power plants in Germany. Uniper’s IPO in September will however still take place, Teyssen confirmed. Some analysts still consider the current write-downs of Uniper not sufficient to provide a realistic estimate of its net worth. A level of 5.5 billion Euro has been mentioned accordingly. These are bad news for the IPO, as the worst-case scenario could entail further write-downs with a total of up to 8 billion Euro (Montel).
The findings of Energy Market Barometer of the Mannheim Centre for European Economic Research (ZEW) indicate that market participants expect higher power prices in the medium-term (up to five years). However, the majority of experts foresee stable prices in the near-term. Hence, the short-term prospects for conventional power generation are still below average until the end of 2016. Big generation companies with a conventional power plant portfolio therefore have to adjust to a lean period for some time to come.
