E.ON has announced a change in its spin-off structure which will now see its nuclear assets remaining within E.ON as opposed to being allocated to Uniper as previously planned.

The change in asset allocation is a response to the proposed German law which would see E.ON liable for nuclear provisions even if allocated to an independent Uniper.

E.ON along with the four largest German utility companies, is liable for €38bn in costs.

We still see good upside from the demerger but step aside for now.

Closing position and taking -18.1% loss.



Wednesday • 27 May 2015 • 14:34

Been poor of late, some of which is related to a continued decline of power prices. However, more significant is the take up of the scrip div which is priced today.

The EON short interest averages 27mn shares, but on ex-date it rose 264mn shares (borrowed for arbitrage vs the scrip. Assuming the increased short interest is all arb related, ~6 mn shares needed to be sold around 27-May.

5% in the last 2 sessions can be explained for these technical reasons. This creates a nice entry point from a technical aspect. However we also like EON from a fundamental aspect.

You have now had 2 solid earnings quarters after a series of warnings in recent years. What is now looking to be a more lenient outcome in the climate contribution debate and clarity from the German Energy Reform over the next few months.

The demerger is another major catalyst where we see major upside on a SOTP approach. This will also lead to a substantial dividend increase.

It has underperformed the DAX by 24% YTD and trades at a discount to the sector. We think this is a good entry point from a technical and fundamental angle. Looking for EUR15.