Eon to lift share capital by 10% ahead of payments on German waste storage

Eon, the German utility, is to increase its share capital by about 10 per cent or up to €1.35bn to strengthen its balance sheet ahead of major payments to a newly-created state-run fund to cover the cost of dealing with Germany’s nuclear waste.

Eon said it would increase its share capital by around 10 per cent, raising it from €2,001,000,000 to €2,201,099,000 by issuing 200,099,000 ordinary shares. The purpose, it said, was to strengthen the company’s equity and liquidity basis.

The price range of the placement is €6.71 to €6.83 per share, Bank of America Merrill Lynch said in a separate statement.

The new shares, which will carry full dividend rights starting from January 1, 2016, will be offered exclusively to institutional investors by means of a private placement, using an accelerated bookbuilding process which will be launched immediately, Eon said.

It said the final placement price and the proceeds from the issue would be made public once the price had been fixed. It said delivery and settlement is expected to occur on or about March 22. Eon added that as part of the transaction it had agreed to a 6 month lock-up period for any transaction related to its shares.

The capital raise is part of a package of ambitious measures designed to reduce Eon’s debt by €7bn. They include asset sales and the axing of 1,300 jobs.

Eon has been a victim of Germany’s green energy revolution, known as the Energiewende, which has battered generators of conventional power. The country has seen a huge ramp-up in wind and solar power, which has squeezed energy produced from gas and coal out of the market. Electricity prices have also fallen, making some traditional power stations uneconomic.

Eon announced earlier this week that it made a net loss of €16bn in 2016 — the largest in its history.

Eon and its rival RWE have responded to the crisis in the power sector by splitting themselves in two. Eon hived off its fossil fuel power plants into Uniper, which floated on the Frankfurt stock exchange in September. RWE pooled its grid, renewables and retail businesses into a subsidiary, Innogy, which debuted in Frankfurt a month later.

Eon and RWE have also been hit hard by Germany’s decision in the wake of the Fukushima nuclear disastter to switch off all its nuclear reactors by 2022. Berlin announced last year that nuclear operators would have to pay €23.6bn into a new nuclear waste storage fund — much more than they had provisioned for.

Eon says it will have to chip in €10bn — €2bn more than it expected to pay.

The company this week unveiled plans to lower its debt from €26.3bn at the end of 2016 to about €20bn. It said options include selling some of its shares in Uniper, in which it still owns a 46.65 per cent stake, transferring its stake in the Nord Stream 1 gas pipeline into a pension fund, divesting non-strategic businesses and issuing a scrip dividend.

The company also said it would lower annual costs by €400m by 2018, resulting in the loss of 1,300 jobs — 1,000 of them in Germany.