Renewables Expansion Boosts Profit at Germany’s Top Power Company

RWE AG increased profits in the first half of the year, boosted by a growing renewables portfolio that the German utility plans to expand further with an aggressive acquisition strategy, it said in a statement on Thursday.

  • Earnings before interest, taxes, depreciation, and amortization grew 18% compared to the same period last year to 1.8 billion euros ($2.1 billion). Profit from its offshore wind business increased 20% due to better weather conditions and new capacity acquired from EON.
  • RWE said it’ll commission 1.3 gigawatts of new wind and solar by the end of the year.

Key Insights

  • RWE announced this month it will buy 2.7 gigawatts of European projects from Nordex SE for 403 million euros. About 1.9 gigawatts of the deal comprises Nordex’s wind projects in France, with the remaining capacity in Spain, Sweden and Poland.
  • The asset swap transaction with E.ON gave RWE a portfolio of wind and solar power assets with a capacity of about 9 gigawatts. RWE has said it will invest about 5 billion euros by 2022 to increase its renewables portfolio.
  • The company’s total power generation output decreased 12% in the first half of the year. Renewable electricity generation more than doubled in the period, boosted by wind production and the consolidation of assets acquired from EON. Gas power generation declined 14% as coronavirus outbreak and a warm and windy weather, specially in the U.K., reduced demand.

Executive Reaction

  • Markus Krebber, RWE CFO: “We confirm our target of increasing the dividend. We are strategically well-positioned and pressing ahead vigorously with the expansion of our core business.”

Market Reaction

  • Elchin Mammadov, utilities analyst at Bloomberg Intelligence: “RWE’s relatively strong resilience of its core renewable business to Covid-19 is one of the key drivers. The company also has a relatively aggressive hedging, protecting it from the decline in power prices.”
  • Auguste Deryckx, an equity research analyst at AlphaValue: RWE’s earnings were positive “but without much in it, many of the positive elements were already mentioned in the first quarter. Even if the group is well on track to achieve its operational targets, we consider the share to be overvalued.”
  • The company’s shares have gained 47% since April, after dropping in March, when the coronavirus crisis hit power demand in Europe.
Renewables Expansion Boosts Profit at Germany’s Top Power Company

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  • RWE kept its outlook for 2020 of adjusted Ebitda in a range of 2.7 billion euros and 3 billion euros and confirmed its proposal to raise this year’s dividend to 0.85 euros per share.
  • Net debt rose to 7.8 billion euros from 6.9 billion euros in December, due to timing effects from hedging activities
  • READ: German Green Power Hits Record Despite Muted Onshore Wind Growth
  • Link to full statement

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