By Geraldine Amiel
TAKING THE PULSE: The deterioration of Europe's economy due to
the sovereign debt crisis has provided a difficult environment for
the region's utilities so far this year. The sector faces
lower-than-expected regulated tariff increases, depressed
electricity prices and reduced energy consumption.
Some companies are handling this by embracing cost savings,
while others could delay or even cancel expansion plans, industry
analysts said.
German utility E.ON AG (EOAN.XE) was the one exception, facing a
brighter outlook thanks to the improved prices secured in the
renegotiation of its long-term gas supply contracts with
Russia.
All eyes are set on financial targets for the second half of the
year, for which the economic situation in the euro zone and its
periphery remains the key.
COMPANIES TO WATCH:
Iberdrola SA (IBE.MC): First half, July 25 before market open
MARKET EXPECTATIONS: Iberdrola's first-half net profit is likely
to be hurt by cuts in government-guaranteed remuneration, but
higher power prices should help to offset these reductions.
MAIN FOCUS: Analysts expect Iberdrola to discuss pending
electricity sector reforms that could further cut into its profits,
in a government effort to reduce the difference between the cost of
generating electricity and the amount consumers pay. Investors will
be watching for comments about the company's plans for its
investments in Brazil.
Electricite de France SA (EDF.FR): First half, August 1 after market close
MARKET EXPECTATIONS: Higher hydroelectric output, due to a wet
spring, should have boosted the group's power generation in the
first half, but that is not expected to be enough to compensate for
lower nuclear output in both France and the U.K. Analysts expect
first half earnings before interest, tax, depreciation and
amortization, or Ebitda, of around EUR8.5 billion and net recurring
profit of around EUR2.5 billion, as indicated previously by the
group's Chief Financial Officer, Thomas Piquemal.
MAIN FOCUS: Analysts expect the group to confirm its full-year
guidance of Ebitda between EUR15.8 billion and EUR16.2 billion, and
net profit of around EUR4 billion, thanks to stable nuclear output
and the increase of regulated tariffs in France. A lot will depend
on the renegotiation of the gas contract at EDF's Edison unit in
the second half, so any comment on the matter from the management
will be welcome. Analysts will also be looking for EDF's view of
the new French government's energy strategy, notably for nuclear
and renewables.
Enel SpA (E): First half, August 2
MARKET EXPECTATIONS: First-half Ebitda at Italy's biggest
utility is expected to be more than 7% lower at EUR8.25 billion,
driven by weaker electricity operations. The key net debt figure is
predicted to increase to around EUR48 billion, due to the company's
dividend payment and adverse foreign exchange effects.
MAIN FOCUS: Investors will keenly watch if there are any changes
to 2012 targets. Focus will also be on any comments on operations
in Spain, and the possibility of the Madrid government raising
taxes to boost public coffers. Any comments on Latin American
operations, which have helped sustain the company's share price
recently, will also be keenly followed.
CEZ AS (BAACEZ.PR): Second quarter, August 9, 0600 GMT
MARKET EXPECTATIONS: CEZ has full-year guidance for net profit
of CZK41 billion, up a sliver from 2011's net result of CZK40.8
billion. It expects full year Ebitda of CZK87.9 billion. Analysts
say the company may be able to reach the target, but it faces
challenges in the second half of the year. The key risk is
uncertainty in the euro zone, which is a significant destination
for CEZ's electricity exports, and is where Europe's power prices
are set. The contracting Czech economy is also a concern.
MAIN FOCUS: CEZ is now focused on its nuclear expansion plans
and is mulling divestments to free up cash. Analysts will be
looking for any new information about how CEZ plans to finance its
nuclear roll out, including whether the dividend will be scaled
back. They will also be looking to see if CEZ can secure government
guarantees on the sale price of power to be produced at the new
reactors, or if it can bring in a strategic partner for the nuclear
expansion.
E.ON AG (EOAN.XE): Second quarter, August 13, before market open
MARKET EXPECTATIONS: Germany's largest utility by market value
is expected to post a year-on-year increase in second-quarter
profits, due mainly to a recent agreement with Russia's gas
exporting monopoly OAO Gazprom (GAZP.RS) over long-term gas supply
contracts. The deal to retroactively adjust commercial terms of gas
supply contracts, announced July 3, should boost Ebitda in the
first half 2012 by about EUR1 billion, E.ON has said. The deal also
prompted the company to raise its full-year earnings guidance.
MAIN FOCUS: Having solved what E.ON previously said was its
single largest operating risk, by agreeing on adjusted gas supply
deals with Gazprom, investors' focus is expected to shift to
present trading conditions in central and western European power
markets. Electricity prices across the continent remain depressed
due to the ailing European economy and the increasing share of
renewables in power generation. E.ON has said it plans to
decommission some loss-making power plants in Germany, in response
to the difficult trading conditions. Investors will also be keen
for an update on E.ON's cost-cutting plans, which aim to wring
savings of EUR1.5 billion from its operations through to 2015.
Ilan Brat in Madrid, Sean Carney in Prague, Jan Hromadko in
Frankfurt and Liam Moloney in Rome contributed to this story
-Write to Geraldine Amiel at geraldine.amiel@dowjones.com
