Report
Tancrede Fulop
EUR 850.00 For Business Accounts Only

Morningstar | EOAN Updated Forecasts and Estimates from 31 May 2019

E.ON transformed itself in 2016 with the split-off of Uniper, its commodities and power generation business, and ultimately the sale of its stake in Uniper to Fortum in January 2018 for EUR 3.7 billion. This deal refocused E.ON on networks, retail, and renewables.E.ON’s business profile is set to significantly change again after the transformative deal with RWE, which is set to be completed by year-end 2019. E.ON will acquire RWE's 77% stake in Innogy. In return, RWE will receive a participation of 16.7% in E.ON and most of E.ON's renewables business. RWE will keep Innogy's renewables and gas storage business. E.ON will carry out a 20% capital increase and get a EUR 1.5 billion cash payment from RWE. Last but not least, E.ON will buy out Innogy's 23% minorities.We think the strategic rationale of the deal is more positive for RWE than for E.ON. Except for its nuclear power plants, to be closed by 2022, E.ON will be fully exposed to networks--around 75% of the group’s EBIT--and retail businesses--around 25% of the group’s EBIT--following the deal completion. This is a negative for us, as the former will be hit by the cut in allowed returns in Germany and Sweden, while the latter is a typical no-moat business dampened by fierce competition due to low barriers to entry and no product differentiation.E.ON targets to extract EUR 600 million-EUR 800 million in synergies from the deal with RWE. These synergies will be the main growth driver after the deal completion, on our estimates.In 2020, the first year after the deal closure, we calculate a net debt/EBITDA of 5 under the company's definition, above regulated peers' average. We estimate that E.ON's dividend will grow by 6.5% annually through 2023.
Underlying
E.ON SE

E.ON is an investor-owned energy company. The Generation global unit consists of all Co.'s existing (fossil and nuclear) generation assets in Europe. The Renewables unit is engaged in managing Co.'s carbonsourcing and renewables businesses. The Global Commodities unit buys and sells electricity, natural gas, liquefied natural gas, oil, coal, freight, biomass, and carbon allowances. The Exploration & Production unit is a active in the focus regions of the North Sea (U.K., Norway), Russia and North Africa. The New Build & Technology unit include Co.'s project-management and engineering operations to support the construction of new power plants and the operation of existing plants.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Tancrede Fulop

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