Moody’s Investors Service boosted the financial rating of RWE, praising its growing exposure to renewables and shrugging off the €400m ($481m) hit taken by the German power giant in the Texas power freeze earlier this year.
Moody' said the issuer rating boost to Baa2, from Baa3 “reflects a strong operating performance last year, a prudent financial policy … and growing renewables generation portfolio as conventional thermal capacity is reduced”.
The ratings agency stressed that RWE’s reported adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for 2020 of €3.24bn ($3.89bn) despite the Covid-19 pandemic came in ahead of its previous guidance.
Moody’s also brushed away the one-off costs incurred due to the extreme cold in the US State of Texas in February that caused a loss of more than €400m.
RWE last month acknowledged to Recharge that it had incurred the massive losses as a result of the extreme cold snap that hit Texas, causing widespread supply outages and massive power price distortions.
Coal and nuclear exit
Taking into account compensation that will be received for early nuclear closure, Moody's nevertheless expects that RWE will continue to meet guidance for a Baa2 rating. The ratings agency added that growing earnings from renewables will offset the impact of coal and nuclear closures, in particular from 2023.
“RWE is focussing on renewable energies, exiting from coal and nuclear energy, and will be carbon neutral by 2040,” RWE chief financial officer and incoming chief executive Markus Krebber said.
“Today, we are already one of the leading producers of green electricity thanks to our broad renewables portfolio. We plan to expand this further – with billions of euros investments we want to continue to grow profitably worldwide. We have the financial means and the expertise to do that.”
Despite Moody’s and the company’s own praise for its strategy, RWE is under intense pressure from public opinion in Germany about its late coal exit date of 2040 – even later than that set for Germany as a whole of 2035-38.
Climate-conscious financial institutions and investors are increasingly dropping or phasing out RWE shares or debt from their portfolios, among them Norway’s large Government Pension Fund Global (sovereign oil fund) and Deutsche Bank.
Moody’s Baa2 rating is a medium grade within the investment grade category, with some speculative elements and moderate credit risk. The ratings agency also said the outlook on all the ratings is stable.