Germany’s Eon warns of another “crisis year” for the energy sector

German energy giant Eon has warned that the coming year will remain a time of “crisis” for the energy sector, despite reporting better-than-expected results for 2022.

Leonhard Birnbaum, CEO of one of Europe’s largest energy suppliers, warned against being “lulled into a false sense of security” a year after the Russian invasion of Ukraine, which led to rising energy prices worldwide and fears of power outages.

Birnbaum said while the continent has weathered the winter and wholesale gas prices have fallen, “that’s not yet a reason to give the all-clear”.

He added: “Prices are still at levels that we would have thought unthinkable just a few years ago. In addition, prices remain volatile. Nobody knows how prices will develop in the coming weeks and months.”

Eon, which buys its energy on the wholesale market and has no direct contracts with Russian suppliers, reported that its adjusted earnings before interest, taxes, depreciation and amortization rose to 8.1 billion euros in fiscal 2022 – better than the company’s own forecast EUR 7.6 billion to EUR 7.8 billion and thus EUR 170 million more than in the previous year.

The main reasons for the better than expected results were the relatively mild weather and a “significant decrease” in the number of customers
Emigration after the Ukraine crisis and savings through synergies.

Analysts said that for a company vulnerable to global energy price volatility, Eon was fortunate to avoid a cold winter that could have forced it to buy large volumes of gas at high prices.

Birnbaum said that Eon, which has around 51 million customers across Europe, will expand its investments to 33 billion euros over the period to 2027 as part of its efforts to play a role in “continuing and shaping an accelerated energy transition in Europe”. .

But he warned policymakers in Germany, which has ambitious targets to drastically expand renewable energy production and make the country carbon-neutral by 2045, that they must “finally get serious” about removing barriers to the transition.

He urged officials to take meaningful steps aimed at “cutting red tape and ending the country’s narrow-minded approach to planning” so companies like Eon could succeed in their efforts to overhaul the country’s energy grid.

About 15 percent of the renewable energy supply in Europe – and two
Third in Germany — are connected to grids operated by Eon.

The company said that to meet Germany’s renewable energy targets, it would need to double its existing 800,000 km of distribution grids in the country by 2030 – a challenge Birnbaum describes as “enormous”.

Eon also said the proceeds from its nuclear power plant would be invested in projects related to the energy transition. The company operates one of the three remaining nuclear sites in Germany.

The lifespan of the Isar 2 power plant near Munich was extended as a result of the Ukraine crisis, when Berlin tried to drastically reduce its dependence on Russian gas.

But it will go offline in April as part of the country’s longstanding phase-out of nuclear power production, announced in response to Japan’s 2011 Fukushima disaster.