E.ON Will Take Impairment Charges on U.S., Europe

By Mike Gavin and Nicholas Comfort

Feb. 10 (Bloomberg) -- E.ON AG will take an impairment charge of 1.5 billion euros ($1.9 billion) on goodwill for its U.S. Midwest market unit and a 1.8 billion fair value charge on European operations, reducing its 2008 consolidated net income.

The moves will have no effect on adjusted earnings before interest and tax or adjusted net income, the key figure used to determine its dividend, it said in a statement. E.ON expects adjusted EBIT and adjusted net to rise between 7 percent and 8 percent this year, and is introducing an efficiency program.

Germany’s largest utility bought power assets abroad in June to expand in markets with higher growth, costing the utility 11.5 billion euros. Since then Chief Executive Officer Wulf Bernotat has suspended a share buyback program and said he will consider shelving planned investments to preserve cash.

The European impairment charge relates to the difference between the book and fair value of operations in Italy, Spain and France that the Duesseldorf-based utility bought from Enel SpA, Actividades de Construccion y Servicios SA and Endesa SA.

E.ON said it expects to pay a dividend of 1.50 euros a share, representing an increase of about 9.5 percent on 2007 when adjusted for the stock split.

The company’s U.K. unit said last month that it will cut 450 jobs, or 2.5 percent of its workforce, largely from its retail segment, after reporting a loss supplying power and gas for the last two years.

Job Cuts

While further workforce cuts aren’t a priority, E.ON can’t rule out job losses, Bernotat told Handelsblatt newspaper yesterday. The utility employed 93,000 people at end-September.

E.ON said it is introducing an efficiency program to improve competitiveness, with improved potential of 1.5 billion euros through 2011 having been identified.

E.ON shares fell as much as 2.9 percent to 24.29 euros in Frankfurt and traded down 2.2 percent at 24.48 euros at 8:14 a.m. local time.

RWE AG, which Bloomberg data show to be about half as profitable per employee as larger rival E.ON, may exceed a target of cutting costs by 1.2 billion euros by 2012, according to Chief Strategy Officer Leonhard Birnbaum.

The Essen, Germany-based utility won’t fire workers before 2012, he told reporters in Arnhem, Netherlands last week.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.netMichael Gavin in Frankfurt on mgavin2@bloomberg.net