E.On Presents Ambitious Three-Year Investment Program

German utility E.On AG on Thursday announced a 28.7 billion euros investment program for the next three years, aimed primarily at boosting its position as Europe's leading private energy group.

E.On said it planned to invest 3.5 billion euros in its chemicals business between 2002 and 2004, but the bulk of its investments - some 23.7 billion euros - would flow into its core energy business.

It added that some 55% of the total sum would be invested abroad, mainly in other European countries and in the United States.

The utility added that the investment program, which had been approved by its supervisory board on Wednesday, could easily be financed from its cash flow and by using the proceeds from its planned disposal of non-core activities.

E.On said its supervisory board had also approved the withdrawal of 76.3 million E.On shares, which the company bought back on the markets in an operation that closed at the end of October.

As a result, the group said its equity capital base would fall by 185 million euros to 1.799 million euros in the form of 692 million shares. By reducing equity capital's proportion of the total capital stock, E.On said it would be improving its capital structure and reducing capital costs.

Around half the sum earmarked for energy in the 2002–2004 investment program would go into two major operations that are already underway - the acquisition of UK electricity company Powergen and of a majority stake in Germany's Ruhrgas, E.On continued.

The Powergen deal, which E.On announced in April, has now been approved by all relevant antitrust authorities with the exception of the U.S. Securities and Exchange Commission.

The Ruhrgas deal, meanwhile, is more complicated affair, bound up as it is with the unraveling of a web of cross-shareholdings among Germany's leading energy groups, including RWE AG and RAG AG.

The German Cartel Office has said it fears that if E.On takes control of Ruhrgas, Europe's largest private gas supplier, an already market-dominant position will be strengthened further.

It has given both companies an opportunity to clear up its misgivings by offering to make disposals and by making other commitments. In Frankfurt, on a weak-tending market, E.On shares were up 1.05% at 53.66 euros at around 13.45 CET on Thursday.