Energy firm Uniper eyes dividend hike as cost cuts continue

DUESSELDORF, Germany (Reuters) - German energy group Uniper UN01.DE on Thursday flagged a higher dividend for 2017, its first year of full independence from former parent E.ON EONGn.DE, adding cost cuts would continue in what it called a challenging environment.

A logo of the German energy utility company Uniper SE is pictured at their headquarters in Duesseldorf, Germany April 19, 2016. REUTERS/Ralph Orlowski

Shares rose as much as 3.1 percent to 14.46 euros, their highest level since Uniper was spun off from E.ON in September, with investors anticipating a higher payout this year and beyond.

The spin-off was a response to years of falling wholesale power prices that have drastically cut the value of fossil-fuel based power plants that now belong to Uniper, with E.ON keeping more promising networks, renewables and retail assets.

Uniper confirmed plans to pay a dividend of 0.55 euros per share for 2016 and said it eyed an increase of about 15 percent for 2017, which suggests a payout of 0.63 euros. This is higher than the 0.59 euro average forecast in a Reuters poll.

“This was another solid set of results from Uniper, with encouraging guidance on the dividend front,” said Deepa Venkateswaran, senior analyst at Bernstein.

Uniper’s shares have gained 40 percent since the spin-off, with investors pointing to successful efficiency measures at its struggling power generation business, where core earnings fell 42 percent.

Uniper, in which E.ON still owns 46.65 percent, aims to save 400 million euros by the end of 2018 from a 2015 baseline, half of which it has already achieved by end-2016 by eliminating overlap and cutting administration.

Impairments on power plants and gas storage assets, under pressure from low wholesale power prices, triggered a full-year net loss of 3.2 billion euros, and the group said it could not rule out another loss this year.

“The situation in our markets remains a real challenge. The measures we’ve announced are absolutely necessary,” Uniper Chief Executive Klaus Schaefer told journalists at the group’s annual press conference.

Annual core earnings (EBITDA) were up 24 percent at 2.12 billion euros ($2.2 billion), beating the 2.04 billion average forecast, but only due to a one-off boost from renegotiated gas supply contracts with Russia's Gazprom GAZP.MM.

This will not be repeated this year and therefore Uniper expects a decline in adjusted EBITDA of up to a quarter in 2017.

($1 = 0.9497 euros)

Additional reporting by Vera Eckert; Editing by Maria Sheahan/Ruth Pitchford