Germany E.ON renegotiates natural gas supply contracts with Statoil
Germany's E.ON has renegotiated its natural gas supply contracts with Norway's Statoil but squeezed profit margins have seen its trading business integrated with other gas divisions, the company said on Wednesday.
E.ON renegotiated terms for 40% of its oil-indexed gas supply volumes at the end of 2011, up from 37% in its third-quarter results, the company said at an investor telephone conference for its 2011 annual results.
E.ON also revealed that it renegotiated its gas supply contract with Statoil. We found "sustainable solution for both parties", a company spokesman said. But the company was tight lipped on the details of the renegotiation. The German utility buys 25% of its gas from Statoil.
E.ON posted a loss of €700m in its gas trading division in 2011. But its upstream division, responsible for gas exploration, increased its profits to about €800m. "We have a margin problem in gas trading," a spokesman told ICIS Heren.
The German utility will now integrate its gas-supply, gas-storage and LNG business with the gas trading division.
"Right now the gas market is extremely difficult, even for a company like E.ON," said E.ON CEO Johannes Teyssen at a press conference presenting the annual results.
"From an organisational perspective the separation no longer offers any advantages," Teyssen said.
E.ON hopes to achieve synergy by "taking an integrated approach to marketing its assets and contracts and by having a consistent market presence", Teyssen said.
Overall, E.ON's gas division saw a 30% drop year on year in earnings before interest and tax from €1.4bn to €1bn in 2011.
The outlook for this year remained grim, with E.ON expecting the margins in its gas wholesale business to remain under pressure.
E.ON predicts a net income for 2012 of between €2.3bn-2.7bn. In 2013, net income is expected to pick up to between €2.3bn-3.7bn. MD
Other Related Stories