Smooth flow

E.ON changes management and discusses strategy adjustments

A process of smooth generational change is unfolding in the top management of the German energy concern E.ON. In recent days, there have been reports in the German media that the concern's supervisory board will elect a successor to the current chairman of the board, Wulf Bernotat, this week. In May, Mr. Bernotat unexpectedly announced that he did not intend to renew his employment contract for a new term. And just the other day in one of his interviews he made it more specific: he intends to fulfill his agreement by May 2010. It is expected that the supervisory board of E.ON will elect 49-year-old Johannes Theissen, who currently holds the post of deputy chairman of the board of the concern, as his successor. A source at E.ON, however, yesterday advised the Vremya Novostey correspondent to wait for the decisions of the supervisory board to be made public. Although local observers unanimously agree that this issue is essentially resolved.

Thus, the process of transfer of power in the senior management of E.ON will take more than eight months. At E.ON this is normal organizational technology: Mr. Bernotat himself was appointed to his current position in 2002 long before he formally assumed it. Johannes Theissen, remaining in the chair of deputy chairman, will receive more and more control over the concern, and Wulf Bernotat will gradually retire.

The main topic of today's E.ON Supervisory Board is long-term planning of the enterprise strategy. The board is expected to present a report on this topic, which will outline a vision of the problems that the new head of the board will have to solve when he gains full strength in his position. One should not expect much novelty here. Among the most important tasks, experts note the need to reduce costs at the concern’s enterprises in Germany itself, as well as the search for ways to most effectively integrate electricity generating capacities in Russia. These processes do not go smoothly in everything.

In this sense, its gas subsidiary, E.ON Ruhrgas, deserves special attention from the concern's management. The business of this largest importer of Russian natural gas is increasingly coming under pressure from new fundamental conditions. Thus, the antimonopoly authority requires E.ON Ruhrgas to separate the gas transmission networks that belong to it as private property. The judiciary previously banned the gas company from entering into long-term gas supply contracts with regional and local gas distribution companies. Natural gas expert Karlheinz Bozem notes in this regard: “The traditional order in the gas industry is being eroded.” Under these conditions, E.ON Ruhrgas, which has traditionally positioned itself as a link between gas imports from Russia, Norway and other producing countries and local gas distributors, is considering the possibility of adjusting its business strategy.

As a possible prospect, E.ON is considering the possibility of closer intertwining of sales and procurement of gas and electricity within Germany. The Financial Times Deutschland (FTD) sees symptoms of this in the personalities of the top managers of E.ON and E.ON Ruhrgas themselves. Thus, the publication notes that the chairman of the board of E.ON Ruhrgas, Bernhard Reutersberg, is allegedly being “considered” as a possible successor to Mr. Theissen in his current post of deputy chairman of the board of E.ON. FTD sees the logic of this appointment in the fact that Mr. Reutersberg has many years of experience as a salesman. Both top managers, Theissen and Reutersberg, have been on the board of the concern's electric power subsidiary, E.ON Energie, since 2001.

Tomorrow, experts, analysts and journalists will be presented at a video conference with the results of E.ON’s activities in the second quarter of this year. Then it will become clear how painful the last months have been for the concern. However, as WestLB bank analyst Peter Wirtz briefly and clearly expressed his expectations in this regard, “the results will correspond to plans.” Wirtz expects a "slight" decline in pre-tax profits. These days, local investors and experts are mostly looking for an answer to the question of which of the two largest energy concerns - E.ON or its closest competitor RWE - will show the best results. RWE will release its quarterly results a day later.

Yuri Shpakov, Berlin