E.on, one of the UK’s ‘Big Six’ energy providers, announced a 71% year-on-year fall in net income today (August 10) for the first six months of 2011.

The UK managing director of E.ON faced a rough ride from customers after announcing increased prices last week.

But the increases, of 11.4% for electricity and 18.1% for gas, came only days before it announced a planned drive to save about £1.3bn by ‘no later’ than 2015.

Currently, E.ON said it was considering losing between 9,000 and 11,000 jobs, mainly in administrative areas and middle management of the company.

But, it’s is unclear if those proposed job losses will be limited to just the German aspects of the business or spread across its portfolio.

E.ON blames the surprising down turn on the German Government’s decision to end its use of nuclear power.

It also said negative earnings from long-term gas procurement agreements and lower than hoped for revenues from its power trading business had also played a part.

In a statement E.ON explained group sales rose by approximately 20% year-on-year to roughly £43bn, but Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) were in fact down by 45%, on a like-for-like basis, to less than £4bn.

Speaking at the presentation of half-year results E.ON group chief executive, Johannes Teyssen, said: “In recent years and in spite of numerous efforts, we have not succeeded in simplifying our administration structures.

“We need simpler, more transparent and less cost-intensive structures if we are to be successful in the future market.

“We cannot afford – not only, but particularly in Germany – any unnecessary management levels, processes and duplication of work.

“My objective is to create a new E.ON which is quicker and leaner, and which successfully operates globally with considerably lower costs.”

Luke Walsh

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