EnBW sees hope in renewables

EnBW, one of Germany’s top four electric utilities, said renewables and other businesses will fully compensate a further dramatic drop in earnings from fossil power generation that has already painfully shrunk its 2013 profit.

The company is assuming that the earnings contribution from conventional power generation will drop by 80% by 2020. This is to be fully offset by strong growth in the areas of renewable energies (250%), grid infrastructure (25%) and the decentralised sales business (100%).

Like other German utilities, EnBW’s profits are breaking away as its fossil power generation is increasingly loss making as renewable energies are pushing more expensive energy sources such as gas out of wholesale electricity markets.

As a result, EnBW’s net profit fell 90% to €51m ($78.8m) last year. The company said, however, that a strategic and structural reorientation it started in 2013, as well as efficiency efforts, allowed a significant portion of the “negative environment effects to be offset.”

Thanks to the efficiency programme, the company had an earnings improvement of €624m. Because of that earnings before interest, taxes, depreciation and amortisation (Ebitda) fell only 5.3% to €2.22bn, EnBW said. Sales rose 3.1% to €9.57bn, helped by a 4.8% increase in renewables sales to 369.4m.

“Last year we established the preconditions to position EnBW as a successful player in the Energiewende, along with all its challenges, but especially with a view to the opportunities it presents," says EnBW chief executive Frank Mastiaux.

"Our strategy follows the shifts in the value chain triggered by the Energiewende. Traditional markets are contracting, while new and interesting growth markets are emerging to which we will orientate ourselves consistently with our new strategy."

The Green party-led state of Baden-Württemberg together with regional municipalities owns the majority of EnBW.

In 2014, EnBW plans to expand its fledgling wind power business by doubling its onshore wind farms in operation to 360MW, and raising its secured project development pipeline to 1GW.

The company also will expand in Turkey where it recently signed a master agreement for a wind farm portfolio of 207MW, and gradually wants to commission the 288MW EnBW Baltic 2 offshore wind farm.

EnBW hopes to offset most of the negative effects from the sector environment in 2014 as well, and expects Ebitda to fall only up to 5% below its 2013 level. The company sees its renewable energies segment to rise between 5% and 15% this year.