E.ON SE

What they do

E.ON operates electric and gas utility businesses through branded market units: E.ON Energie in Central Europe, E.ON Ruhrgas in Pan-European Gas, E.ON UK in the U.K., E.ON Sverige in the Nordic region, and E.ON U.S. in the U.S. Midwest. The company reports segments using Adjusted EBIT as its measure, derived from income from continuing operations before taxes and minority interests, excluding interest income and adjusting for disposals, restructuring, and other exceptional items. E.ON transitioned to U.S. GAAP reporting beginning in 2000; previously it reported under German Commercial Code and Stock Corporation Act principles.

Revenue drivers

• Central Europe energy (E.ON Energie) — Comprises E.ON's German and continental European energy business, formed from the merger of PreussenElektra and Bayernwerk; it is a core market unit for electric and gas sales.
• Pan-European Gas (E.ON Ruhrgas) — Houses E.ON's gas business through E.ON Ruhrgas AG, formerly Ruhrgas AG and its consolidated subsidiaries.
• U.K. energy (E.ON UK) — Represents E.ON's U.K. energy business through E.ON UK plc, formerly Powergen UK plc, covering electricity and gas supply.
• Nordic energy (E.ON Sverige) — Comprises E.ON's Nordic energy operations through E.ON Sverige AB, formerly Sydkraft AB; this unit included E.ON Finland until its disposal.

Recent performance

The filings excerpted do not include specific revenue or earnings figures for the 2006 fiscal year. As of December 31, 2006, E.ON had 659,597,269 outstanding Ordinary Shares with no par value. The company reports segment sales and Adjusted EBIT prior to intersegment eliminations, and Adjusted EBIT has been its segment performance measure since 2004. No other numerical results from the 2006 annual report are provided in the source material.

Strategy

E.ON uses Adjusted EBIT as its primary segment reporting measure under SFAS 131 and states that it evaluates segment performance and allocates resources based on this metric. The company emphasizes that Adjusted EBIT is a non-GAAP measure and should be considered in addition to, not as a substitute for, the most directly comparable U.S. GAAP measures. The filing notes adjustments for net book gains from disposals, cost-management and restructuring expenses, other non-operating exceptional items, and an economic reclassification of certain interest income and pension/nuclear waste provision interest. The excerpt does not describe specific forward-looking investment plans or priorities beyond these reporting conventions.

Risks

• Foreign exchange translation risk — Dollar amounts in the annual report are translated from euros at the December 29, 2006 Noon Buying Rate of $1.3197 per 1.00 solely for convenience, and actual rates used in preparing the consolidated financial statements may differ, so dollar figures may not represent actual euro amounts.
• Non-GAAP measure limitations — Adjusted EBIT excludes certain items and involves management adjustments, including for disposals, restructuring, and interest income, and E.ON acknowledges material limitations compared with directly comparable U.S. GAAP measures.
• Segment intersegment eliminations — Segment sales and Adjusted EBIT are presented prior to elimination of intersegment transactions, so segment figures may not reconcile directly to consolidated Group results without further adjustment.
• Regulatory and market unit concentration — E.ON's operations are organized around specific geographic market units in Central Europe, Pan-European Gas, the U.K., the Nordic region, and the U.S. Midwest, exposing the company to differing regulatory and market conditions in each jurisdiction.

Outlook

The source excerpt does not contain management's forward-looking outlook or guidance for periods after the 2006 fiscal year. The filing only establishes E.ON's reporting framework and organizational structure as of December 31, 2006. No specific future targets, investment plans, or market expectations are described in the provided material.