TAKING THE PULSE: The market expects some solid performances from utilities in the final quarter of 2008 and over the full year, with forward sales and hedging helping to delay the full impact of much weaker power prices.

However, power demand is a more immediate concern, and analysts will look closely at this set of earnings to assess the impact of weakening industrial and commercial activity.

Meanwhile, companies may have to cut earnings guidance, which were already considered as conservative, given the sharp fall in power prices.

Observers of the sector will also look closely at how the utilities plan to fund their operations this year and how they will tailor their investment plans to an environment of weakening energy prices and expensive credit.

As Citigroup's utilities analysts recently pointed out, however, it isn't all doom and gloom for investors in utilities as the companies' valuation is now more attractive relative to the broader equity market.

COMPANIES TO WATCH:

--- Enel SpA (ENEL.MI) - (Feb. 3; Preliminary '08 results) ---

MARKET EXPECTATIONS: Analysts expect a solid set of 2008 results, lifted by the consolidation of its 67% stake in Spain's Endesa SA (ELE.MC) and Italian generation. Enel's practice of selling forward two years of electricity generation has shielded it from the recent drop in prices following weaker commodities. Revenue is estimated to climb about 38% to EUR60.5 billion, while Ebitda is forecast to advance about 43% to EUR14.3 billion.

MAIN FOCUS: Observers will be on the lookout for a lower net debt level, any comment on the dividend and asset disposals. Eyes will also be on possible Enel plans to buy out Acciona SA's (ANA.MC) 25% stake in Endesa allowing the Italian utility to fully run the Madrid-based company.

--- GDF Suez (GSZ.FR) (2008 revenues on Feb. 2; full results on March 5) ---

MARKET EXPECTATIONS: The company should perform solidly enough in the fourth quarter, although "not stellar" in the words of one analyst. In 2009, however, the situation could change, with the liquefied natural gas market among potential areas of weakness. Brokerage Kepler Capital Markets expects momentum to be "downhill from here," even though some analysts continue to praise the company's profile relative to peers.

MAIN FOCUS: When the merged company made its stock market debut in July, many observers saw its 2010 guidance of earnings before interest, taxes, depreciation and amortization of EUR17 billion as conservative amid high power prices. Today's economic woes have changed that: analysts are now a lot less bullish on the company's ability to hit the target, and await the management's comments. The continuing saga of the companies tax liabilities in Belgium, home of the company's nuclear power stations, is another issue of note. Other questions include whether the company will adjust its current investment plans and how it plans to preserve its balance sheet.

--- E.ON AG (EAON.XE) - (4Q/FY08 Results) - Mar. 10 ---

MARKET EXPECTATIONS: E.ON's solid operating earnings trend is expected to have continued in the fourth quarter and full-year. The company sells the bulk of its power production in forward contracts and therefore should have locked in high power prices. The recent fall in electricity prices is unlikely to show in earnings before 2010, analysts say. Possible revaluation of gas derivatives could hit the bottom line.

MAIN FOCUS: Analysts are keen to see E.ON's new medium-term earnings targets, which the company will release with 2008 full-year earnings. So far, E.ON has pledged to reach adjusted earnings before interest and taxes to EUR12.4 billion in 2010. Further focus will be on E.ON's dividend proposal for 2008.

--- Electricite de France SA (102421.FR) (2008 earnings - Feb. 12) ---

MARKET EXPECTATIONS: The company expects profit excluding non-recurring items not to exceed the 2007 level, and analysts see this as the likely scenario. SocGen sees the company giving new medium-term objectives after a year of expansion. The cold conditions in France so far this winter, which left EDF with less power to sell on the wholesale market, may have also drag, as it is more lucrative than the regulated domestic market.

MAIN FOCUS: EDF has said a provision related to the Tartam regulated tariff for industrial power clients will hurt its earnings, but there's still some confusion as to the impact. The majority-state-owned company's investment plans, linked closely to the government's aim of stimulating the economy, could feed doubts among some investors. Meanwhile, the company has taken on debt to fund an acquisition spree, and some observers say the company may sell an asset to reduce gearing.

--- Veolia Environnement (VE) (2008 earnings March 6) ---

MARKET EXPECTATIONS: After several profit warnings, the company held firm to its most recent guidance in January, when it announced a change of finance director. Observers say they doubt the company would give such confirmation if it was going to miss its operating cash flow goal. Still, the company could perhaps introduce an exceptional charge lower down the income statement, one analyst said. Weakness in the waste business, as volumes decline and scrap sells for less, are likely to hit earnings.

MAIN FOCUS: The shares took a hit recently after Veolia changed its finance director, who many analysts saw as a force for rigor at the company. There is a lot of interest in why a former banker with experience of dealmaking has come to the post, and analysts will watch anything he says about growth or divestments very closely. After multiple profit warnings and the erosion of market confidence in the management, Veolia's outlook for 2009 is more important than ever. The reported interest of some U.S. investment funds in the company is another key theme.

--- RWE AG (RWE.XE) (4Q/FY08 Results) - Feb. 26 ---

MARKET EXPECTATIONS: Observers expect power generation to remain RWE's main profit driver amid high electricity prices. Like E.ON, RWE sells the vast majority of its power production in forward contracts, so fourth-quarter earnings won't reflect the recent decline in prices. RWE has said it already sold more than 90% of 2009 and 70% of 2010 power production. The company has also recently given an upbeat power consumption outlook, saying demand for electricity will remain robust despite falling industrial activity.

MAIN FOCUS: RWE has pledged to provide a new medium-term earnings target when it releases 2008 results. So far the company has targeted a 5% compound annual growth rate for operating profit through 2012 and 5% to 10% CAGR for recurrent net profit through 2012. Analysts will further focus on whether RWE will fulfill its commitment to increase the dividend payout ratio for 2008 to 70% to 80% of recurrent net profit. A possible sale of further American Water shares is another key theme.

 
   Company Web sites:  http://www.edf.com 
                       http://www.veolia-finance.com 
                       http://www.enel.com 
                       http://www.rwe.com 
                       http://www.eon.com

-By Adam Mitchell, Dow Jones Newswires, +33 1 40171756; adam.mitchell@dowjones.com

(Jan Hromadko in Frankfurt and Liam Moloney in Rome, contributed to this report.)

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