RWE Jumps to 10-Month High as Utility Says Targets on Track

(Bloomberg) -- RWE AG jumped to the highest since July after Germany’s biggest power producer said profit is on target and it plans to pay a dividend for the first time in three years. 

The Essen-based utility’s efforts to boost plant efficiency and the contribution of energy trading is helping compensate for weak power prices, Markus Krebber, chief financial officer at RWE, said in a statement. Full-year adjusted net income will be 1 billion euros ($1.1 billion) to 1.3 billion euros.

RWE is trying to recover from the collapse in electricity prices to the lowest in more than a decade that prompted a revamp including the sale of part of its Innogy SE renewables business in 2016. From this year, RWE has split its power plants into separate divisions. Earnings almost doubled at its European Power business that contains hard coal, natural gas and hydro generation, while profit for the lignite and nuclear generation unit halved.

“It was a better than expected start to the year,” said Ahmed Farman, an analyst at Jefferies International Ltd. The European Power unit exceeded expectations, he said.

RWE climbed as much as 4.6 percent to 16.31 euros, the highest since July, before trading at 15.98 euros at 12:26 p.m. in Frankfurt. The stock has risen 35 percent this year, the second-best performer on Germany’s benchmark DAX index, which rose to a record earlier on Monday before erasing gains.

Both power plant units can “operate even more flexibly and focus on their respective energy sources” for a long-term future, RWE’s Krebber told reporters on a conference call.

Running the businesses separately with different management teams makes sense, according to Guido Hoymann, an analyst at B. Metzler Seel Sohn & Co. KGaA. 

Adjusted net income dropped 18 percent to 689 million euros in the three months through March. That compares with a 737 million-euro average estimate of five analysts compiled by Bloomberg.

The company plans a dividend of 50 euro cents for 2017. RWE plans to resume dividends to all shareholders for this year after scrapping it on common stock for 2015 and 2016.

• Revenue fell 2.7 percent to 13.3 billion euros
• Ebitda fell 6.5 percent to 2.13 billion euros
• Net debt rose 4.4 percent to 23.7 billion euros from end-December

(An earlier version of this story corrected Markus Krebber’s title.)

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net.

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net, Andrew Reierson, Anna Shiryaevskaya