The German Eon warns of another “crisis” year in the energy sector

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

Leonhard Birnbaum, the chief executive of one of Europe’s biggest energy providers, warned against being “lulled into a false sense of security” a year after Russia’s invasion of Ukraine sent global energy prices soaring and fears of blackouts.

Birnbaum said that while the continent has survived the winter and wholesale gas prices are down, it’s “not a reason to give the all clear yet.”

He added: “Prices are still at levels we would have thought unthinkable a few years ago. In addition, prices are still volatile. No one 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 utilities, reported that adjusted earnings before interest, taxes and depreciation rose to €8.1 billion in fiscal 2022, better , as the company’s own forecast. From €7.6 billion to €7.8 billion and €170 million higher than the previous year.

The main driving force behind the better-than-expected results was the relatively mild weather and a “significant decrease” in the number of customers.
the downturn following the Ukraine crisis and the savings achieved through synergies.

For a company exposed to global energy price swings, Eon has been lucky to avoid a cold winter that would have forced it to buy large volumes of gas at high prices, analysts said.

Birnbaum said Eon, which has around 51 million customers across Europe, will increase its investments to €33 billion in the period up to 2027 to play a role in “driving and shaping Europe’s accelerated energy transition”.

But he warned policymakers in Germany, which has ambitious goals to dramatically expand renewable energy production and make the country carbon neutral by 2045, that they “need to take seriously” the obstacles to the transition.

He called on officials to take meaningful steps to “reduce red tape and end the country’s parochial planning approach” so that companies like Eon can succeed in their efforts to transform the country’s energy grid.

Around 15 percent of European renewable energy sources – and two
a third in Germany – connects to the networks operated by Eon.

The company said that to meet renewable energy targets in Germany, it will need to double the country’s 800,000km of distribution network by 2030 – a challenge Birnbaum called “enormous”.

Eon also announced that it would invest the revenues from its nuclear power plant in projects related to the energy transition. The company operates one of Germany’s three remaining nuclear sites.

The life of the Isar 2 plant near Munich was extended as a result of the Ukraine crisis as Berlin sought to drastically reduce its dependence on Russian gas.

But it won’t be available in April as part of the country’s long-running shutdown of nuclear power, announced in response to Japan’s 2011 Fukushima disaster.