German energy company E.ON AG is raising its earnings outlook for this year after reaching an agreement on long-term gas supply contracts with Russian gas producer Gazprom OAO.

E.ON said Tuesday that it expects to add about (EURO)1 billion ($1.26 billion) to its half-year results following the deal. For the whole year, it said it now expects pretax earnings of between (EURO)10.4 billion and (EURO)11 billion - up from its previous guidance of (EURO)9.6 billion to (EURO)10.2 billion.

E.ON sold its 3.5 percent stake in Gazprom in late 2010 in what it said was a bid to reduce its debt and free capital for strategic investments. It said the agreement now reached with Gazprom includes "retroactive adaptation of pricing conditions" for the period since the fourth quarter of that year.