German Nuclear Giant E.ON Reels After Fukushima, Major Layoffs And Losses Loom
Exclusive: Things haven’t been the same for Germany’s E.ON since the March 11 nuclear catastrophe in Japan. The subsequent phase-out of nuclear energy in Germany is costing the company billions. E.ON is now planning radical cost-cutting measures that are
The date has etched itself into his memory. When Johannes Teyssen talks about March 11, 2011, he does so in a low, tense voice. That was the day that marked Before and After for the E.ON chairman. The malfunctioning Japanese reactor set off a chain reaction that turned his world upside down. It was a day when several German government ministers woke up in favor of atomic energy, and went to bed that night opposing it.
Evidence of just how extreme the effect of this was on Germany is emerging now in Düsseldorf at E.ON headquarters. Even though the battle with regard to the nuclear phase-out is still on-going, behind the scenes, Teyssen, E.ON's chairman of the board, is turning a page. Germany's largest energy provider is going on an austerity diet and undertaking a restructuring so severe it represents a first in the company's history.
According to Süddeutsche Zeitung sources, major subsidiaries E.ON Ruhrgas in Essen, E.ON Energie in Munich and a power plant run out of Hannover are due to be dissolved as independent companies, and many hundreds of jobs will be made redundant.
E.ON leadership set to move quickly
And this could just be the beginning. According to the source, E.ON is also planning to sell off various parts of the business and transform others into partnerships. Russia's Gazprom has already expressed interest. What remains of the subsidiaries after dissolution will be concentrated at E.ON's Düsseldorf headquarters.
For observers and for high-ranking managers alike, the scale and speed of the restructuring comes as a surprise. For example, in 2010, gas subsidiary E.ON Ruhrgas, which employs 1,800 people, opened new facilities in Essen at a cost of 200 million euros. However, restructuring plans are seemingly already far advanced and the powers that be at E.ON want things to proceed quickly – word has it that the board has already met to discuss it, although an E.ON spokesperson refused to comment on that. "Following a significantly changed framework, we are examining possible strategy adjustments and the positioning of the company," he said. "But no decisions have been taken."
Pressure is mounting: E.ON faces not only the nuclear phase-out but the fall of natural gas prices. Losses could reach 1 billion euros in what was once the highly profitable natural gas business. Negotiations with Gazprom over discounts have so far proved fruitless. According to SZ sources, E.ON chairman Teyssen met again with Gazprom brass a week ago, to try and avoid escalation of the discussion that would necessitate putting the matter before a court of arbitration, but apparently without success.
Internationalization at a standstill
Closing subsidiaries like Ruhrgas, Western Europe's largest natural gas company, will mark a major turning point for the company, as will a move away from other areas -- a fundamental departure from the model of integrated energy company with a finger in every pie, from power stations to electrical sockets. Areas that the company has further use for under the new configuration will be concentrated in Düsseldorf or transferred to new entities. Similar steps are expected to be taken with subsidiaries abroad, says the SZ source. E.ON's board is supposed to meet this week to discuss plans.
The internationalization of the company that Teyssen announced last autumn is also at a standstill. E.ON was going to get into two global developing markets that would mean that by 2015, at least 25% of the company's results would come from outside Europe. It is now possible that E.ON will only focus on one new market, says the SZ source.
No doubt there are hard times ahead for E.ON, formerly a star performer on the stock exchange. Just last autumn, Teyssen and other top E.ON managers were considered some of Germany's most influential business leaders. Since Fukushima, that's no longer the case. Of 17 German nuclear power plants, half are now turned off; all of them will be shut by 2022. That's a loss of 22 billion euros in profits.
E.ON's restructuring plans are causing a great deal of unrest. Traditionally managed in a consensus style, the present apparent lack of transparency threatens to unleash major conflict between management and workers. The unions are already talking about taking a harder line. However, for the time being: "We're not aware of any concrete plans. It's difficult to believe that a plan like that would be unanimously approved by the board," said a German United Services Labor Union (Verdi) official.
Read the original story in German
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