DUBAI (Reuters) - RWE (RWEG.DE) could split up its business like peer E.ON (EONGn.DE) if wholesale power prices continue to fall as cost cuts alone may not be enough to get Germany's largest power producer back on track, its chief executive said.
Germany's worst-performing large-cap company this year, RWE is struggling with nearly 26 billion euros ($28.5 bln) of net debt and has slashed costs and jobs in an attempt to end years of falling profits.
German wholesale power prices TRDEBYZ6 have nearly halved since early 2012 and currently trade at 29.35 euros per MWh, squeezing margins at the group's power plants to the point where it becomes more economical to simply shut them down.
Larger rival E.ON last year decided it would spin off its ailing gas- and coal-fired power plants into a separate unit as a result, a move that RWE Chief Executive Peter Terium does not rule out if prices slide further.
"The case X has not yet occurred but at power prices of 28 euros ($31) per megawatt hour (MWh) things are slowly getting exciting," he told reporters in Dubai during a press trip. "It's becoming harder to just cut more costs," he said.
The pressure on Germany's utilities has accelerated amid concerns over their ability to come up with the funding to pay for shutting down the country's nuclear plants, which will be completed by 2022.
Berlin has tasked a commission with presenting ideas on how to safeguard the up to 80 billion euros in funds by the end of January, with a public trust being one option under discussion.
"We have never been that close to a solution," Terium said.
He also said that RWE would expand its business outside Europe to offset falling earnings at its conventional power generation unit, adding the Middle East, North Africa and Turkey would become profit drivers in the future.
While ruling out large acquisitions to enter these markets, RWE said it would look at assets that may be put up for sale by Enerjisa, a Turkish joint venture of E.ON and Sabanci Holding (SAHOL.IS).
It is also looking into solar and wind power projects in Egypt.
Terium confirmed that the group had for now scrapped plans to look for an outside investor in the Gulf region, but did not rule out that this plan could be revived in the future.
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Writing by Christoph Steitz; Editing by Georgina Prodhan and Susan Fenton