Germany’s Biggest Power Generator Looks Abroad for Growth
Germany’s Biggest Power Generator Looks Abroad for Growth
(Bloomberg) -- Germany’s biggest generator of electricity is looking abroad for growth as it closes down coal-fired power plants targeted in the government’s fight against climate change.
With many of the nation’s best sites for wind and solar farms taken and a complicated permission system, RWE AG is looking to build renewable-energy assets in the U.S., Britain, Eastern Europe and Asia.
The goal indicates the limits RWE has for maneuver in Germany, where utilities are negotiating with Chancellor Angela Merkel’s government over how long they can continue to operate coal plants and what incentives will be in place for alternative energy supplies. The nations must tighten limits on pollution to meet targets it pledged for reducing emissions under the Paris Agreement on global warming.
“Our future in Germany won’t be determined by us,” Markus Krebber, chief financial officer at RWE, said in an interview in Frankfurt. “What’s important for us is having a stable, reliable and favorable investment environment, which is determined not only by the company, but moreover by the government.”
RWE is supporting Germany’s energy transition, which envisions handing a 65% market share to electricity from green sources by 2030, up from about 44% now. In order to achieve that, Merkel’s administration decided in January to shut down coal plants by 2038.
While RWE and its rivals that operate those plants will be compensated, the lack of a firm policies to draw in more investments in renewables leaves the outlook at home uncertain.
New RWE
That means new projects abroad. RWE has 1.5 billion euros a year to invest in green energy, backed by its own cash flow, and may be able to boost that sum to 3 billion euros, Krebber said. That firepower could be complemented with a sale of RWE’s approximate 15% stake in EON SE. RWE, he said, wants to recycle cash from the EON stake into other investments.
Those goals follow a shakeup in Germany’s utility landscape, with RWE and EON carving up Innogy SE to follow different focuses. EON will concentrate on grid services, and RWE on power generation. That deal also gives RWE a position in renewables for the first time, enabling it to leave its position as Europe’s biggest emitter of carbon dioxide.
The company’s newest renewables subsidiary is set to become the third-largest clean energy company in Europe, with a portfolio of more than 9 gigawatts with power generation capacity. Most of that will come from wind farms.
Even so, RWE has fierce competitors in green energy and will retain responsibilities for its coal mining and power plants for years to come, according to AlphaValue, an energy consultancy based in Paris.
“The picture is far less green compliant when it comes to its worldwide relative weight of renewables,” AlphaValue said in a report. “RWE remains the European utility most exposed to de facto outlawed coal and lignite.”
RWE is developing a pipeline of more than 5 gigawatts of offshore wind and 3 gigawatts of onshore wind.
While the U.K. and Asia offer initially good potential for offshore wind investments, Krebber said, the company sees competitive advantages in the U.S. and also in onshore wind, solar energy and battery storage.
“There is no interest in buying existing assets, that is for investors with a lower cost of capital,” the executive said, adding that RWE will join with infrastructure funds to help fund developments. “We are out there looking, especially in the new markets, to acquire developers, platforms, pipelines and then constructing and operating plants ourselves.”
To contact the reporters on this story: Vanessa Dezem in Frankfurt at vdezem@bloomberg.net;William Wilkes in Frankfurt at wwilkes1@bloomberg.net;Brian Parkin in Berlin at bparkin@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Andrew Reierson
©2019 Bloomberg L.P.