E.ON AG (E.ON) is expecting its adjusted EBIT for 2008 to surpass the prior-year figure by 7 to 8%. The company anticipates a similar increase in adjusted net income. Based on this figure, the E.ON board of management anticipates that it would propose to the E.ON supervisory board that the company pay a dividend of EUR1.50 per share. Adjusted for E.ON’s stock split, this represents an increase of roughly 9.5% on the dividend for the 2007 financial year.
In E.ON’s consolidated financial statements for 2008, the impairment tests will result in an impairment charge of EUR1.5 billion on goodwill for the company’s US Midwest market unit and an impairment charge of roughly EUR1.8 billion on the difference between the book value and the fair value of the operations in Italy, Spain, and France that it acquired from Enel/Acciona and Endesa. The main reasons for the US Midwest impairment charge are an increase in the market-unit-specific cost of capital and lower long-term growth rates due to the deterioration of the overall economic situation. The increase in Italy’s corporate tax rate from 27.5% to 33% for companies in the energy, banking, and insurance industries is a main factor in the impairment charge regarding the shareholdings and power stations acquired from Enel/Acciona and Endesa. In addition, the outlook for the Italian energy market became gloomier in the fall of 2008, in part due to regulatory intervention in wholesale markets and to the current reduction in power production resulting from a delay in the start of operations at certain power plants. At the time the transaction closed, these factors, among others, were not fully apparent.
The impairment charges will reduce E.ON’s consolidated net income. But they will not affect the company’s adjusted EBIT or its adjusted net income, the key figure E.ON uses to determine its dividend payout.