Germany’s largest utility, E.ON (FWB: EOAN), has received a significant boost after Russian energy group Gazprom (MICEX-RTS: GAZP) agreed to cut the price of long-term gas supply contracts.

After much tense negotiation, the agreement will enable it to raise its profit forecast, after a challenging 2011, following the German government’s decision to phase out nuclear power.

AFP reports that the Düsseldorf-based company nearly doubled its outlook for 2012 underlying net profit, and earnings before interest and taxes were forecast to hit €10.4bn-€11.0bn compared with the company’s old range of €4.1bn-€4.5bn.

E.OM, German rival RWE and Poland’s PGNiG had spent the past four years trying to get Gazprom to agree to price cuts. The Russians at the start of 2012 agreed a roughly 10 per cent price cut with another group of clients, including Italy’s Eni.

The news comes following the announcement by E.ON of its strategic investment in distributed generation. PEI carries a poll today asking if E.ON has made the right decision. You can vote here

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