The soon-to-be-spun-off power station and energy trading unit of E.ON (EONGY) will begin life by shrinking, after it announced plans to sell at least €2 billion ($2.3 billion) of assets by 2018 to pay down debt and fund capital investment.
Uniper, which stands for unique performance, said on Tuesday, that it would consider offers for any of its assets and would pursue a "radical reduction" of operating costs and cut capital investment to maintenance levels.
"Uniper is going to be a lean organization," the unit's CFO, Christopher Delbrück, told a press conference on Tuesday. "There will be no sacred cows."
Essen, Germany-based E.ON announced plans to spin off its 40 gigawatts of non-renewable generation assets and its fossil fuel trading arm in late 2014, claiming the business was no longer compatible with its focus on renewable energy. The split is due to take place later this year, following a vote by E.ON shareholders at a meeting on June 8.
The parent group will retain a 46.65% stake in the new unit to "show we have faith in Uniper's potential and future," E.ON CEO Johannes Teyssen told reporters on Tuesday. That faith has its limits though. E.ON will sell its remaining stake "over the medium term," he added.
Uniper will emerge into one of the most difficult energy markets in recent memory. Energy prices have slumped to near-decade lows while its focus on fossil fuel generation is at odds with a wider shift, particularly in its home German market, toward renewable energy generation.
The company would have posted pro-forma adjusted Ebitda of €1.7 billion in 2015, down 15% on its 2014 figure of €2 billion as the collapse in oil markets dragged energy prices lower.
There could be worse to come, according to Exane BNP Paribas analysts, who earlier this week predicted that a further deterioration in the power price environment will push the Uniper's Ebitda to about €950 million by 2018 and below €900 million by 2019.
The new unit had pro-forma debt of €4.7 billion at the end of 2015 and, as it made clear on Tuesday, will have to make cutting that debt its first task if it is to maintain the "solid" investment grade rating that E.ON is promising it will have.
Uniper's management claims it has already identified €2 billion of potential disposals. Yet, identifying and delivering are two very different things, especially in the current market. Uniper's ability to meet its disposal target without undercutting its already pressured earnings will decide its short-term future.
E.ON shares traded Tuesday at €9.18, up €0.12 or 1.3%, on their Monday close but have fallen almost 37% over the past year.