March 4, 2014 / 8:33 AM / 6 years ago

RWE posts historic net loss as writedowns bite

ESSEN, Germany (Reuters) - Germany’s biggest power producer RWE AG (RWEG.DE) has posted its first annual net loss in more than six decades, after a surge in solar and wind capacity undercut the profitability of its power plants and triggered nearly 5 billion euros ($6.9 billion) in writedowns.

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

The company said on Tuesday it had swung to a net loss of 2.76 billion euros from a profit of 1.31 billion a year earlier, its first net loss since 1949. Sources had told Reuters on Friday that the group may post a full-year net loss of close to 3 billion euros.

Many of Europe’s big power producers have been slow to respond to a fast-growing renewable sector and have also been hit by weak energy demand and record-low wholesale power prices.

Last week, a 15 billion euro writedown dragged French peer GDF Suez GSZ.PA deep into the red and the company warned that the crisis in the European utilities sector would last for a long time.

“In the coming years, our power plants will earn even less than feared. We had to account for that in our annual results,” RWE Chief Executive Peter Terium said in RWE’s 2013 report.

Terium added that the group may decide to close or mothball further plants in 2014, after having announced such plans for more than 5,000 MW, or nearly 10 percent of its total capacity.

The rise of solar and wind energy, which are given priority access to German power grids, has hurt RWE’s coal- and gas-fired plants, some of them state-of-the-art, and claimed much of their former earnings power.

Terium has described the current situation as “the worst structural crisis in the history of energy supply”.

RWE is also burdened by 30.1 billion euros of debt and has suffered a 71 percent plunge in its shares since their peak in 2008.

It is looking for several ways to raise cash, including asking shareholders for provisional approval for a share issue of up to 20 percent of its existing share capital, or as much as 3.5 billion at RWE’s current share price.

The group is also selling its oil and gas exploration unit DEA RWEDE.UL, which it still expects to complete this year.

“This is a realistic goal. But it depends on the price offered to us,” Terium said.

Initial bids for the unit came in between 3.5 billion euros and 5 billion, sources have said, adding that binding bids were not to be expected before the end of March.

RWE also confirmed its outlook for the current year, still expecting an operating result of between 4.5 and 4.9 billion euros, while its recurrent net income, the source for the group’s annual dividend, is seen at 1.3 to 1.5 billion euros, down from 2.31 billion last year.

RWE shares traded up 1.6 percent at 29.165 euros by 0817.

Editing by Mark Heinrich and David Holmes

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