E.ON calls for higher grid returns in Germany as core profit jumps

By Vera Eckert and Christoph Steitz

FRANKFURT (Reuters) -E.ON on Wednesday called on Germany's energy regulator to raise future returns on grid investments, warning Europe's top economy risked falling behind in its efforts to build out power infrastructure.

Europe's largest grid operator posted a 13% rise in first-half adjusted core profit to 5.5 billion euros ($6.43 billion), and reiterated its outlook for 2025 adjusted earnings before interest, tax, depreciation and amortisation of 9.6 billion to 9.8 billion euros.

E.ON shares were 1.6% higher at 1125 GMT, further helped by CFO Nadia Jakobi indicating that the group will likely hit the upper end of the guidance. The shares are up 40% year-to-date, benefitting from a structure that essentially shields it from the impact of U.S. tariffs.

"We continue to believe that E.ON is excellently positioned in the distribution infrastructure sector, which is highly relevant for the energy transition," Metzler Bank analysts said in a note.

CEO Leonhard Birnbaum confirmed E.ON expects to invest 43 billion euros over the 2024-2028 period, but warned other European nations were creating better grid incentives.

Energy grid operators depend on fixed rates of return and have warned that caps must be raised in Germany's new five-year regulatory period for electricity network earnings from 2029.

Birnbaum also urged German regulators, who want to firm up plans for the next period by year-end, to consider higher caps to ensure enough money flows into the country's grid expansion.

The German regulator currently allows pre-tax write-off rates of return on equity employed of 7% on new infrastructure and 5% for existing infrastructure pre-tax, compared to 7%-9% elsewhere in Europe.

($1 = 0.8559 euros)

(Reporting by Vera Eckert, Christoph Steitz and Tom Kaeckenhoff, Editing by Miranda Murray, Kirsten Donovan)