E.ON stops new gas from Gazprom, warns of diving profits amid robust 2021 results

Germany’s largest energy firm has warned about falling profits this year due to the phase-out of nuclear power and geopolitical risks emerging out of the Ukraine crisis.

E.ON said on Wednesday that it expects adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of US $8.6 billion (7.8 billion euros), down from the 7.9 billion euros it made in 2021.

The company’s 2021 results surpassed expectations and E.ON continued to perform very well despite a turbulent market environment and the second year of the Covid pandemic, top officials said. “E.ON finished the year successfully and surpassed expectations, thereby further strengthening the financial foundation for future growth,” CFO Marc Spieker said in a statement.

However, the company took into account the absence of profits from its nuclear power plants – a large number of which have been switched off by Germany’s nuclear exit roadmap. These businesses still contributed 1.6 billion euros of adjusted EBITDA in 2021 to E.ON’s bottom line, the company said in a statement.

At the company's annual-results press conference on Wednesday, E.ON CEO Leonhard Birnbaum condemned the attack on Ukraine and said: “The war of aggression against Ukraine is a terrible reversion to dark times. We condemn war and violence and fully support the European Union’s sanctions.”

Birnbaum announced that E.ON had stopped procuring new gas from Gazprom trading companies in Europe in response to the war. While the company has no long-term supply contracts directly with gas producers, a small amount in its portfolio has been purchased from Gazprom trading companies, Birnbaum said.

He said the short-term goal was to maintain energy security for the next two years. "We also have to ensure the affordability of energy. For households as well as for industry. There are no easy solutions, nor can Germany afford to take an ethically purist position if it doesn't want to jeopardize its industrial base and economy. That's why I welcome the German government's prudent approach," Birnbaum said.

The company’s 2022 profit forecast was subject to future developments surrounding the Russia-Ukraine conflict, it said.

"E.ON mainly perceives risks for commodity markets and associated credit and liquidity risks as well as valuation risks for investments, among others the stake in Nord Stream AG," the group said in a separate statement.

E.ON is Europe’s largest operator of energy networks and through its pension fund holds a 15.5 percent stake in Nord Stream 1, which is majority owned by Gazprom.