Germany’s RWE stays on track, records surge in profits

RWE

The headquarters of German utility RWE.

Decline in earnings anticipated in lignite and nuclear segment


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German utility RWE said on August 14 net income amounted to €2.7 billion, up from €457 million in the first half of 2016.

“RWE is on track. According to our current planning, we should finish the fiscal year towards the upper end of our forecast ranges,” RWE CEO Rolf Martin Schmitz said in a statement. “The key indicators also demonstrate that our financial situation provides us with a solid foundation for the future. And we made the right decisions in defining our strategy,” he added.

RWE CFO Markus Krebber said the good business performance makes the German company optimistic about the future. “We still expect to propose to next year’s Annual General Meeting the payment of an ordinary dividend of €0.50 per share for fiscal 2017. Above and beyond this, we are planning on paying a special dividend of €1 per share in relation to the nuclear fuel tax refund,” Krebber said.

RWE said the German utility company is satisfied with its performance in the first six months of fiscal 2017. From January to June, the Group posted adjusted EBITDA (adjusted earnings before interest, taxes and depreciation and amortisation) of €3.2 billion, compared to €3.0 billion in the same period last year. All of the segments made positive contributions to earnings.

Net income amounted to €2.7 billion, up from €457 million in the first half of 2016. Along with the good business performance, this improvement was driven by a significantly better financial result and the nuclear fuel tax refund, RWE said. In early June, the German Constitutional Court ruled that the law on the nuclear fuel tax was unconstitutional and retroactively void.

Adjusted net income – which does not include the nuclear fuel tax refund – totalled €809 million, RWE said. This represents an improvement of 35%. For 2017 as a whole, RWE continues to expect adjusted EBITDA of between €5.4 billion and €5.7 billion, and adjusted net income of between €1.0 billion and €1.3 billion. According to current planning, the company expects to close the year underway at the upper end of these forecast ranges.

“We used the first half of this year to further develop our company, in line with our strategy,” Schmitz, explained. “These efforts include forward-looking projects intended to successfully position the company to achieve our main aim of ensuring security of supply,” he added.

For instance, RWE has taken initial planning steps at the Tilbury power station site in the UK, with an eye to creating options for the construction of gas-fired power plants and a battery storage facility. In the Netherlands, RWE is retrofitting power stations for the use of biomass. This state-subsidised area of business offers long-term security for both investments and returns. Another innovative solution is the marketing of decentralised generation capacities from emergency generators by Supply & Trading.

In parallel, optimisation of the power plant portfolio ensures a very high degree of efficiency in power generation and flexibility of the power stations, RWE said. This flexibility is crucially important to be able to offer security of supply, because with a close relationship between trading and power stations, the required generation capacities can be provided exactly when they are needed, when the highest revenues can be generated, either on the market or for grid services.

Turning to lignite and nuclear, RWE said that during the first half of 2017, adjusted EBITDA of the Lignite & Nuclear Segment fell to €401 million. The main reason for this was lower wholesale prices of electricity compared to the previous year. For 2017 as a whole, RWE said the company continues to anticipate that the division’s earnings will be much lower than in the previous year.

Adjusted EBITDA in the European Power Segment totalled €222 million, compared to €316 million in the first six months of last year, RWE said. The decline of almost €100 million was due exclusively to the lack of special items, which amounted to roughly €132 million last year. In operating terms, earnings actually improved year on year. The division is performing better than planned. The margins and dispatch of gas-fired power stations are higher than expected. Hard coal-fired power stations remain under pressure.

However, RWE said the company is countering this by pressing ahead with efficiency enhancement measures. The commercial optimisation of power plant dispatch also made a strong contribution to the division’s earnings. RWE now anticipates a significantly improved result from this segment in 2017, in particular as one-off revenue from the sale of a power station site in the United Kingdom will also be recognised in the second half of the year. A decline in this division’s earnings was originally forecast.

RWE also said that net debt expected to decline. As of June 30, 2017, the net debt of the RWE Group amounted to €21.5 billion, down €1.2 billion on the figure recorded at the end of 2016. This was mainly due to the nuclear fuel tax refund and lower pension obligations. Consequently, RWE now projects that as of end-2017, net debt will be lower than last year’s figure of €22.7 billion.

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