Fossils propel RWE to historic loss
German utility RWE posted its first net loss in more than 60 years for 2013, due to massive impairment losses at its fossil generation business that can’t compete with renewable power entering the grid with priority.
The Essen-based group had a net loss of €2.76 ($3.8bn) last year, reversing a €1.31bn net profit a year earlier. Earnings before interest, taxes, depreciation and amortisation (Ebitda) were down 6% to €8.8bn.
Losses were heightened by a €4.8bn impairment the company recognised from its fossil generation business. Without the one-off effect, RWE’s recurrent net income would have fallen 6% to €2.31bn last year.
The utility has already said it will mothball over 5GW in gas- and hard coal-fired power plants across Europe.
Among those is the state-of-the-art Claus C power plant in the Netherlands, RWE chief executive Peter Terium complained.
“With an efficiency of nearly 60%, it has the lowest emissions possible for fossil-fuelled power stations.” Terium says.
“And now we’re mothballing this power plant, because it is being forced out of the market by subsidised solar power and is therefore making losses. Accepting this is difficult.”
While making losses in conventional generation, operating profit at RWE’s own renewables division Innogy went up 7% to €196m. The main drivers here were the expansion in generation capacity, for example from the 504MW Greater Gabbard offshore wind farm that was fully commissioned in August.
Innogy wants to continue expanding its renewables capacity, but RWE reiterated that for financial reasons it must further reduce its pace of growth in the division to about €1bn in the 2014 to 2016 period.
RWE Innogy’s renewables capacity should rise to 3.4GW this year from 2.9GW at the end of last year, the company said.
“As regards the expansion of renewable energy, we are focusing on onshore wind turbines in Germany, the UK, the Netherlands and Poland,” RWE’s 2013 report states.
“In addition, we are building two offshore wind farms. We hold a 60% stake in Gwynt y Môr off the coast of Wales, which has a total installed capacity of 576MW, and we are the sole investor in Nordsee Ost (295MW) near Helgoland, Germany.”
After those offshore farms are completed, RWE intends to stop pursuing several new offshore wind projects simultaneously, and will look for public and private partners.
The utility also plans to continue raising funds by selling stakes in existing renewables assets, next to trying to sell its oil and gas upstream business RWE Dea.
The utility this year expects a further substantial decrease in earnings, with a recurrent net profit of between €1.3bn and €1.5bn.