Germany's E.ON SE said on Sunday, Nov. 30, it will spin off its conventional power generation, energy trading and exploration operations into a new company and expects to book a €4.5 billion ($4.6 billion) writedown as it turns its attention to renewable energy.
The move is the most radical step yet in a long-running restructuring of E.ON, which had until this week focused on offloading assets to pay down about €31 billion of debt. E.ON also on Sunday said it had sold its Spanish and Portuguese assets to Australia's Macquarie Group for €2.5 billion, and confirmed plans to sell its Italian operations and review options for its North Sea exploration and production business.
"We are convinced that it's necessary to respond to dramatically altered global energy markets, technical innovation, and more diverse customer expectations with a bold new beginning," E.ON CEO Johannes Teyssen said in a statement. "E.ON's existing broad business model can no longer properly address these new challenges."
Germany's power sector has been roiled by a state-backed surge in renewable energy production, which has forced prices lower and undermined the profitability of traditional coal and gas-fired power stations.
For E.ON, sluggish economic growth in Southern Europe has hurt demand in markets that it had hoped would drive earnings growth. E.ON in 2008 paid €11.5 billion to buy power stations in Italy and Spain from Enel SpA and Endesa SpA just as the global financial crisis hit and both nations' economies began to contract.
E.ON said on Sunday that the non-cash €4.5 billion charge it plans to book is largely related to a collapse in the value of its Southern European assets. That charge is in addition to €700 million of writedowns already announced over the first three quarters of this year.