By Natalia Drozdiak and Jenny Busche
FRANKFURT--German power company E.ON SE said Wednesday the
bankruptcy protection filing by its Brazilian joint venture Eneva
SA would hurt its bottom line this year, but wouldn't have a major
impact on its earnings outlook.
Eneva, a power utility jointly owned by E.ON and Brazilian
entrepreneur Eike Batista, filed for bankruptcy protection in a
court in Rio de Janeiro after it failed to refinance its 2.33
billion Brazilian reais ($898 million) in outstanding debt, the
company said.
An E.ON spokesman said write-downs of its Brazilian operations
would affect this year's net profit, but E.ON couldn't yet judge
the scale of the damage. It said, however, it wouldn't have much of
an impact on its 2014 earnings before interest, taxes, depreciation
and amortization, or its underlying net profit figure.
Last week, E.ON said it would establish a new company around its
conventional power-generation operations, global energy trading,
and exploration and production units, which include its struggling
operations in Brazil.
E.ON has had problems with its operations in Brazil since the
collapse last year of the business empire of its partner, former
billionaire Mr. Batista. He sold a stake in the energy company,
formerly known as MPX Energia SA, to E.ON in 2012. E.ON now has a
43% stake in Eneva and Mr. Batista has 20%. E.ON has had to invest
about EUR1.3 billion ($1.6 billion) in Eneva since entering the
Brazilian market, far more than originally planned.
The Eneva news didn't spook E.ON investors, with shares up 1.0%
around 1137 GMT.
"There are still pros [to operating in Brazil] given its very
regulated producer market," said Equinet analyst Michael Schäfer.
"One's better off there than in southern Europe, where there's
excess capacity."
Before E.ON said it was splitting into two companies, it was
shifting more operations to markets such as Russia, Turkey and
Brazil, in a bet electricity demand will grow faster there than in
Europe.
"At least this shows that Eneva is a genuine non-recourse
subsidiary, although it is still negative for sentiment and not a
good reflection on E.ON's past strategy," said BNP Paribas analyst
James Sparrow.
Eneva said the seven thermoelectric power plants operated by the
company weren't included in the filing, which relates to the
holding company, Eneva SA, and its subsidiary Eneva Participações
SA The joint venture operates around 2.4 gigawatts of generating
capacity, serving about 7 million households.
Luciana Magalhaes
in São Paulo contributed to this article.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Jenny
Busche at jenny.busche@wsj.com
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