German energy giant Eon has warned the year ahead will remain a period of “crisis” for the energy sector, despite posting better than expected results for 2022.
Leonhard Birnbaum, the chief executive of one of Europe’s largest energy suppliers, cautioned against being “lulled into a false sense of security” one year on from Russia’s invasion of Ukraine, which caused soaring global energy prices and fears of blackouts.
Birnbaum also delivered a warning to policymakers in Germany, which plans to dramatically expand renewable energy production and make the country carbon-neutral by 2045, telling them they must “finally get serious” about clearing obstacles to the transition such as delays to permits for expanding infrastructure.
The Eon boss said that a combination of luck with a mild winter, a swift response by policymakers and an agile response by some companies had helped Europe to survive the “massive disruptions” to the energy market triggered by Vladimir Putin’s invasion.
But he warned that, although wholesale gas prices had fallen, this “isn’t yet a reason to sound the all-clear”.
Birnbaum added: “Prices are still at levels we would’ve considered unthinkable just a few years ago. Moreover, prices remain volatile. Nobody knows how prices will develop in the weeks and months ahead.”
Eon, which buys its energy on the wholesale market and did not have direct contracts with Russian providers, reported that its adjusted earnings before interest, tax, depreciation and amortisation rose to €8.1bn in the 2022 financial year — better than the company’s own forecast of €7.6bn to €7.8bn, and €170mn higher than the previous year.
It said the main drivers of the better than expected results were the relatively mild weather, a “significant reduction” in customer
churn in the aftermath of the Ukraine crisis, as well as savings made through synergies.
Analysts said that, for a company that was vulnerable to global energy price fluctuations, Eon was lucky to avoid a cold winter that could have forced it to buy large volumes of gas at high prices.
Birnbaum said that Eon, which has about 51mn customers across Europe, would expand its investments to €33bn in the period to 2027 as part of its efforts to play a role in “advancing and shaping an accelerated energy transition in Europe”.
But he had strong words for policymakers in Germany, where Eon will play an important role in expanding distribution networks. The company has said that, to meet its renewable energy targets, Germany will have to double its existing 800,000km of distribution networks by 2030.
Yet Birnbaum said that there were parts of the country where Eon needed to secure hundreds of permits but had been unable to secure “a single one” in recent years because of laborious and slow bureaucracy.
“We can’t resolve that by the local area hiring two people to deal with that,” he said. “We need a totally different approach here when it comes to permitting otherwise I can tell you now, we will fail with the enlargement of the infrastructure.”
Eon also said earnings from its nuclear power plant would be invested in projects related to the energy transition. The company runs one of Germany’s three remaining nuclear sites.
The life of the Isar 2 plant, near Munich, was extended as a result of the Ukraine crisis as Berlin sought to dramatically reduce its dependence on Russian gas.
But it will go offline in April as part of the country’s longstanding phaseout of nuclear power production that was announced in response to the 2011 Fukushima disaster in Japan.
Eon’s outgoing chair, Karl-Ludwig Kley, on Wednesday criticised that plan as the “wrong decision”. He told the German business publication Handelsblatt: “Before we scrape together coal from all possible seams, it would be much more logical to keep the nuclear power plants running.”