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RWE to cut more jobs and costs in face of renewable boom
November 11, 2013 / 1:21 PM / 4 years ago

RWE to cut more jobs and costs in face of renewable boom

FRANKFURT (Reuters) - Germany’s No. 2 utility, RWE (RWEG.DE), is expected to cut more jobs than planned, squeeze more costs and sell more assets when it reports earnings this week due to weaker prospects in electricity generation as the country shifts toward renewable energy.

The headquarters of German power supplier RWE are pictured in the German town of Essen March 6, 2012. REUTERS/ Ina Fassbender

RWE is set to slash a further 3,400 jobs and increase the scope of its savings programme, dubbed “Neo”, to 800 million euros $1.07 billion (669 million pounds), up from at least half a billion, a source familiar with the matter said in September.

Analysts expect RWE’s operating profit will drop to 4.96 billion euros ($6.62 billion) in 2014, down 16 percent from an estimated 5.9 billion this year, according to Thomson Reuters StarMine.

RWE has said it plans to update investors on its cost cutting efforts when it releases nine-month results on November 14. The renewable boom has already forced it to cut thousands of jobs, close down some plant capacity and curb dividend payments in a bid to stay competitive in the industry’s worst ever crisis.

    Credit Suisse analyst Vincent Giles said he expects RWE to announce additional cost cuts of up to 1 billion euros and an update on the group’s disposal programme, aimed at lowering its 35 billion euros net debt as of June 30 2013. Its net debt in 2012 was 33 billion euros, up from 29 billion in 2011.

    RWE’s shares have lost 44 percent since 2011, when Germany abandoned nuclear power after the Fukushima disaster, underperforming its German rivals E.ON (EONGn.DE) and EnBW (EBKG.DE). Analysts say this is due to its weaker position in renewables, which account for less than 3 percent of RWE’s earnings, compared with more than 12 percent at E.ON.

    Investors will also want to hear about progress on the planned sale of RWE’s oil and gas exploration unit DEA RWEDE.UL, which according to sources has drawn interest from private equity houses KKR (KKR.N) and Blackstone (BX.N), as well as industry players, Wintershall (BASFn.DE) and Kuwait Foreign Petroleum Exploration Co (Kufpec).

    DEA accounted for about 11 percent of RWE’s operating profit last year. ($1 = 0.7491 euros)

    Editing by Louise Heavens

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