EOAN GR

Publicly traded companies mentioned herein: E.ON SE (EOAN GR), Innogy SE (IGY GR)

Highlights

The presenter is long shares of German electric utility company E.ON (EOAN GR) and sees meaningful upside potential for patient shareholders following the spin-off of Uniper (which is E.ON’s conventional coal and gas businesses). The backdrop has been terrible for European utilities over the past five years as the transition to clean/ renewable energy (from “dirty” sources of power) has progressed, and E.ON has not escaped the malaise due to its nuclear assets (shares are down ~30% over the past year, and 60% over the past five). However, recent events placed in context with E.ON’s asset base and the outlook for the “newco” following the Uniper spin-off suggest the risk/ reward is favorable with the stock at €6.75. In particular, a meaningful decrease in interest expense and runway for growth in renewables may be underappreciated by the market.