E.ON raises investments to $46 billion, shares near 6-week high

By Christoph Steitz and Tom Käckenhoff

ESSEN, Germany (Reuters) – E.ON, Europe’s biggest operator of energy networks, on Wednesday raised its five-year investment target to 42 billion euros ($46 billion), saying the continent required major grid expansion to make the transition to clean energy sources.

E.ON’s shares rose 6.1% to their highest level in nearly six weeks. Traders and analysts pointed to a better-than-expected 2024 outlook and the mid-term, as well as the group’s 4.32% dividend yield, the highest among Germany’s listed energy companies.

The new spending plan for the 2024-2028 period is up 27% from the 33-billion-euro target for the previous 2023-2027 period, the company said, adding this would lead adjusted core profit (EBITDA) to rise to 11 billion euros by 2028.

With an implied annual capital expenditure of 8.4 billion euros, E.ON plans are the most ambitious among German energy companies but rank behind European heavyweights Iberdrola and Enel, which aim to spend an average of 15.7 billion and 11.9 billion euros a year, respectively.

A surge in decentralised renewable energy assets has caused European energy companies to raise spending on grid expansion, eager to cash in on the fixed returns they offer.

“Across Europe, there are massive expansion plans for renewable facilities that will need to be connected to networks,” E.ON Chief Financial Officer Marc Spieker said.

“That’s why we’re investing even more and even faster in our power grid infrastructure, which is set to continuously grow by an average of ten percent annually through 2028.”

Investments could even surpass the 42-billion-euro target, Chief Executive Leonhard Birnbaum told Reuters, saying this required a favourable regulatory environment that provides sufficient returns on network spending.

In presentation slides, E.ON said it has additional balance sheet capacity of 5-10 billion euros.

For 2024, the company is expecting EBITDA to decline to 8.8 billion to 9.0 billion euros, from 9.4 billion last year, which was marked by a number of one-offs at the group’s retail energy division.

This is higher than the 8.6 billion euro average estimate in a poll provided by the company.

E.ON said it would propose increasing its dividend to 0.53 euros per share for 2023, up from 0.51 euros each for the previous year. This is in line with the 0.53 euro LSEG estimate.

($1 = 0.9140 euros)

(Reporting by Christoph Steitz and Tom Kaeckenhoff; Additional reporting by Vera Eckert; Editing by Louise Heavens, Tom Hogue and Emelia Sithole-Matarise)