RWE Underlines Targets as Profit Rattled by Green Revolution

(Bloomberg) -- RWE AG stuck to its full year earnings and dividend targets even after reporting weaker profit as the utility adapts to Germany’s shift away from nuclear and coal-fired plants.

  • Stand-alone adjusted earnings before interest, tax, depreciation and amortization for the 9 months through September slumped 24 percent from a year earlier to 1.3 billion euros ($1.47 billion).
  • RWE kept its full-year EBITDA target of 1.4 billion euros to 1.7 billion euros and maintained its dividend forecast of 70 cents per share.

Key Insights

  • Senior RWE employees have been taken aback by the extent of public opposition to the firm’s plans to flatten a 12,000-year-old patch of the Hambach Forest to mine lignite. Even so, RWE Chief Financial Officer Markus Krebber said on Wednesday’s press call that he expects to get approval to work the site after last month’s court decision to stop operations. Resuming mining there is key for RWE, as the halt would cost it as much as 200 million euros a year.
  • The company’s exposure to a rapid coal phaseout in Germany has been a central concern for investors, with a commission about to issue a report on how the nation intends to get back on track for its climate reduction targets. To prepare for the future, RWE said teams working on the preparation of integration of rival EON’s renewable business into the group are making good progress.

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  • RWE’s asset swap with EON is proceeding according to plan, with the aim of getting the deal through the European Commission by next summer. Under the asset swap with EON, RWE will become focused on power generation whereas EON will operate a consumer-facing business. The deal faces probes from German regulators and EU competition officials.
  • Germany, Europe’s biggest power market, will shut down its last atomic plants in 2022 and lower power generation also pressured earnings after the December 2017 closure of the Gundremmingen B nuclear power plant.
  • For a link to the earnings statement, click here

Market Reaction

  • RWE gained 2.1 percent in Frankfurt to the highest in more than a month, outperforming Germany’s blue-chip DAX index which slipped in the wake of worse-than-expected German GDP data.
  • RWE’s shares had risen 9.6 percent this year before today’s results. That compares with an 11 percent drop for the DAX and a 0.7 percent slide for the STOXX 600 Utilities Index.
  • “The key focus for investors remains the outcome of the coal commission and the timing and impact of the coal phase-out in Germany,” said John Musk, an analyst at RBC Europe, who noted the results were in line with forecasts.

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