FRANKFURT Germany's No.2 utility RWE (RWEG.DE) gave a more optimistic outlook for 2012 earnings after halving losses at its energy trading unit by renegotiating gas price contracts.
Gas contracts have been a major problem for European utilities which agreed long-term deals with companies such as Gazprom (GAZP.MM) and Statoil (STL.OL) when prices were high, having to sell to retail customers at lower tariffs.
RWE has not yet resolved contract talks with Gazprom but has managed to renegotiate others which had been a burden in 2011.
The group said on Wednesday it had cut the loss at its trading and midstream unit to 403 million euros ($512.25 million) in January through September 2012 compared with a 842 million euro loss a year earlier.
"Our performance over the first three quarters of the current financial year has been quite good," Chief Executive Peter Terium said.
As a result, RWE said 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) may now exceed the 8.46 billion euros achieved last year, compared with previous guidance for stable earnings.
"The quality of the raised outlook shouldn't be overestimated given that improved -- but naturally volatile -- trading results primarily triggered the upgrade," said Equinet analyst Michael Schaefer.
At 1237 GMT, shares in RWE were down 0.4 percent, in line with Germany's benchmark DAX index .GDAXI.
CUTTING COSTS, ASSET SALES
RWE also stuck to its 2013 outlook, seeing EBITDA at about 9 billion euros, a sharp contrast to rival E.ON's (EONGn.DE) downgrading of its 2013 outlook on Tuesday which sent its shares down 11.5 percent.
RWE cut its capital expenditure by 1 billion euros ($1.27 billion) in the first nine months of 2012, while the recent sale of assets, including its stake in British nuclear joint venture Horizon, has gained momentum.
"We will implement further cuts," Terium said, not being more specific. Terium told Reuters in late October that RWE was planning to cut more jobs than 10,400 already announced, out of a total workforce of about 71,500.
Germany's top utilities aim to sell assets worth at least 23.5 billion euros due to weaker power demand and following Germany's decision to exit nuclear power last year.
RWE plans to sell up to 7 billion euros worth of assets by the end of 2013, more than one fifth of which has been completed. E.ON has met most of its 15 billion euro sell-off target.
RWE also benefited in the first nine months of the year from the availability of brown coal, which it mines itself nearby, and the low cost of covering carbon-intensive power production under the European carbon trading mechanism, because the cost of emissions rights is down.
Prices for carbon permits have been trading between 6 and 9 euros a tonne CO2 for most of the year due to an economic downturn which has reduced demand for permits from industry and power companies.
(Editing by Elaine Hardcastle)