E.ON confirms German gas retail prices to rise

“As you know, oil prices have risen to record levels,” said Bernhard Reutersberg, chairman of the board of Ruhrgas, the E.ON group’s gas wholesale arm and leader of its pan-Europen gas group. “We are watching this with concern but can’t decouple ourselves from this as our procurement prices have risen faster than the price we sell at to our customers.” After a number of price reductions for customers early last year, the company will now raise prices further, he said, but did not immediately specify the level and timing of price hikes.

The weekly magazine Der Spiegel had reported on Monday that Ruhrgas was planning to raise prices by up to 25% in a two-step hiking round. Ruhrgas prices were already raised in October, January and April, but details under individual contracts were not published. Gas in continental Europe is index-linked to oil prices with a certain time lag.

Oil hovered around $133 a barrel on Tuesday, only $2 off its record high. It has risen nearly 40% this year on a weak dollar and problems in producer countries. E.ON Ruhrgas sells three quarters of its gas to long distance shippers and local utilities and the rest to power stations and customers abroad.

Adjusted earnings before interest and tax at the Ruhrgas unit, a significant contributor to overall profitability of the E.ON group, in Q1 2008 dropped by 10% on the year earlier result to €1.0 billion ($1.58 billion). Reutersberg said this was a result of the gap between buying-in prices widening over those passed on to customers and to increased competition. (Reuters)