RWE Sinks to Red in 2015 Despite Booming Renewables Division

RWE’s Renewables Division more than doubled its earnings in 2015 compared to a year earlier, but EUR 3 billion in write-downs and impairments have resulted in the German utility posting EUR 200 million net loss for the year.

Based on unaudited pro-forma figures, RWE posted an operating result of EUR 3.8 billion, as well as EUR 1.1 billion adjusted net income. The posted figures are within the ranges forecast by the company in March 2015. At EUR 7 billion, the company’s EBITDA was much higher than expected, however, this was due to special items.

The improved results from the utility’s Renewables Division helped cushion the financial blow caused by deteriorating results in conventional power generation segments.

The continued collapse of wholesale electricity prices came to bear, leading to an erosion of power plant margins. The prospects in the conventional power generation business have worsened further. This caused RWE to recognise an impairment of EUR 2.1 billion for its German and UK power stations, which reduced the non-operating result. Moreover, a write-down of EUR 0.9 billion in deferred taxes had to be recognised in the income statement.

Due to the recent dramatic deterioration of the earnings prospects of conventional power generation, the Executive Board of RWE AG has decided to propose to the Annual General Meeting a suspension of the dividend payment to holders of common shares for fiscal 2015.Another reason for this decision by the Executive Board are the current political risks.

“In light of the current economic prospects of conventional power generation, we reached a decision concerning the dividend today that did not come easily to us. We know that we might disappoint many shareholders with today’s decision. However, it is necessary in order to strengthen our company,” said Peter Terium, CEO of RWE AG.

“A dividend policy with good measure, which corresponds to what is feasible, is also in the interests of the shareholders. We will harness all our forces in order to master the crisis in conventional power generation, while seizing the business opportunities we are offered by the structural change in the energy sector.”

At the end of 2015, RWE decided to pool renewables, grids and supply in a new subsidiary and list it on the stock market. RWE plans to increase the new company’s capital by about 10% by the end of 2016 by issuing new shares. The proceeds will be earmarked to finance further growth in forward-looking markets. So far, the company is making rapid progress and is on schedule to make this move.

For 2016, RWE expects EBITDA of EUR 5.2 to EUR 5.5 billion, an operating result of EUR 2.8 to EUR 3.1 billion and adjusted net income of EUR 0.5 to EUR 0.7 billion. This represents a considerable decline compared to 2015. Besides the erosion of margins in conventional power generation, the absence of the positive special items recorded last year also comes to bear. RWE plans to tackle the operating and technical problems in the UK supply business with resolve, but anticipates burdens in this area again in 2016.