Germany’s biggest utility E.ON will shutter nearly 13 GW of capacity—more than a quarter of its conventional fleet in Europe—to offset the “negative effects of a difficult economic and regulatory environment” in the European Union (EU), CEO Johannes Teyssen said on Wednesday. 

The company released gloomy financial year results for 2013, reporting a 14% drop in earnings compared to 2012, and attributed the losses to an absence of earning streams from divested companies and “the market situation in fossil fueled-power generation.”

“In particular, the ramifications of policy decisions in Germany and the related insufficient market prices for conventional energy continue to have an adverse impact on our generation portfolio, which has long been a mainstay of our business. That is why in 2013 we further intensified our efforts to systematically adapt E.ON to the rapidly changing market situation,” Teyssen said.

The next few years will be as difficult, Teyssen said. E.ON’s business is expected to generate only limited funds for new investments. Alongside necessary maintenance and network investments, going forward the company will focus in particular on expanding growth businesses like renewables and distributed-energy solutions. “We are investing very carefully and selectively in our new businesses and keeping risks to a minimum,” Teyssen said. “But I would like to add that not making investments is not an option for us. Our company’s transformation must continue, particularly in difficult times. It’s the only way for us to lay the foundation for future earnings.”

German power company RWE last August also said it would shutter 3.1 GW of conventional generation across Europe on similar profit woes. RWE said the subsidized expansion of renewables in Germany is causing the margins and utilization of conventional power stations to decline.

Industry group EURELECTRIC in February, meanwhile, urged policy makers in the EU to reduce inefficiencies and market distortions.  “The value of our companies is deteriorating, political and regulatory uncertainty is high and security of supply is at stake. Action is needed and it is needed now,” the sector group said.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)