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E.ON takes on new energy customers as smaller rivals collapse

01/19/2022 | 10:43am

By Christoph Steitz, Tom Käckenhoff and Vera Eckert

FRANKFURT (Reuters) - E.ON, Europe's No. 1 operator of energy networks, has recently absorbed hundreds of thousands of customers across the continent who ended up without a provider after record prices forced several smaller rivals to collapse, its CEO said.

While this is just a tiny share given the group's 50 million customer base in Europe, it indicates how the current price spikes, caused by a mix of growing demand and higher fossil-fuel costs, have become a headache for energy retailers.

"We have taken over several hundreds of thousands of customers in Britain, Germany and the Czech Republic," Chief Executive Leonhard Birnbaum told Reuters. "This is placing a great burden on us currently."

Birnbaum said the unexpected inflow of customers was a problem because the group needed to procure energy for them at current market prices, which have eased in recent days but are still up nearly fourfold in some cases from last year.

In Britain, where E.ON is the second-biggest retailer after Centrica's British Gas, more than 20 energy firms have exited the market since September, unable to cope with the price rise that they cannot fully pass on to customers.

While it's a smaller number in E.ON's home market Germany, some local players have also defaulted, which Birnbaum said required tougher regulation for new market entrants that do not have the resources to handle a volatile market.

"The energy market is not a market that is suitable for speculation on the retail side," Birnbaum said, adding that E.ON's retail business was well positioned and therefore had fared better than others during the crisis.

"However we are paying for having to take on customers of those that have acted uneconomically. We don't want that to become an annual thing. Something needs to happen."

Birnbaum he said he was optimistic that the tough British retail market, where E.ON recently took over former rival npower, would benefit from market changes regulator Ofgem considers due to the crisis.

E.ON transferred virtually all of its generation assets to RWE as part of a landmark transaction that closed in 2020, but still operates Isar 2, one of three German nuclear power plants that will be phased out by the end of 2022.

Once Isar 2 goes offline, E.ON's nuclear division, PreussenElektra, will focus on decommissioning, which Birnbaum said will not weigh on profit as costs will be borne out of the company's provisions.

(Reporting by Christoph Steitz, Tom Kaeckenhoff and Vera Eckert; editing by David Evans)

© Reuters 2022
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