E.ON ups 2012 outlook after price deal with Gazprom

German energy company E.ON AG raised its earnings outlook for 2012 after reaching an agreement on long-term gas supply contracts with Russia’s gas major Gazprom.

The company said it now expects earnings before interest, taxes, depreciation and amortization, or EBITDA in 2012 to be about €10.4-11.0 billion, compared to previous estimates of €9.6- 10.2 billion. Net income for the year is expected to reach € 4.1-4.5 billion, up from a previous forecast of €2.3-2.7 billion.The price agreement with Gazprom is also expected to have a positive €1 billion impact on the company's half-year results, due to be issued August 13, the company said in a statement.On Friday Gazprom said it revised gas prices for E.ON. The price cut was similar to a that received by Wingas, a joint venture of Wintersall and Gazprom. “The price correction will help us sell gas in a competitive way,” Gazprom Deputy CEO Alexander Medvedev told the meeting of shareholders. “Volumes won’t be reduced.”E.ON’s Ruhrgas unit had been talking to Gazprom since late 2010 about cuts as the 2008 recession caused a fuel surplus, dragging spot prices below long-term contracts. "The deal with Gazprom is good news and helps solve a big problem for the company," the company said in a statement.This year Gazprom agreed to an average 10% price cut for a number of European customers such as GDF Suez and Wingas.