Offshore wind emerges as cash cow for RWE despite lingering coal commitment

Germany's largest power generator earns more from wind at sea than any other generation source, latest earnings reveal

. RWE's Rodsand 2 offshore wind farm in the Danish part of the Baltic Sea.
. RWE's Rodsand 2 offshore wind farm in the Danish part of the Baltic Sea.Foto: RWE

Offshore wind last year became the most successful business area at RWE and is set to further cement its role as key cash cow for Germany’s largest power producer.

However, despite the success of its renewable generation segments, the company stuck to a broadly unambitious plan to become carbon neutral two decades from now as it unveiled its latest annual results.

“The past financial year was an outstanding one for RWE, despite the challenges of the coronavirus crisis,” outgoing chief executive Rolf Martin Schmitz said.

“We are investing billions of euros in renewables. At the same time, we are rigorously and reliably reducing our CO2 emissions with a clear target: RWE will become carbon neutral by 2040.”

RWE’s stubborn clinging to coal and lignite could be increasingly toxic for its finances, however.

France’s biggest insurer, AXA, according to a report last week by the Bloomberg newswire is dropping RWE as a client – despite an apparent effort by Schmitz to persuade his counterpart at AXA, Thomas Buberl, to retreat from his conviction that RWE’s coal phase out is too slow.
Boosting renewables fleet

RWE last year incorporated the renewable generation assets of its former rival E.ON, and by the end of next year plans to increase its wind and solar power capacity to 13GW, from previously 9GW.

In offshore wind, RWE in 2020 had adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of €1.07bn ($1.28bn), 11% higher than the pro-forma result for 2019. For the current fiscal year, the company forecasts earnings from wind at sea in the €1.05-1.25bn range.

Results in offshore will be helped by RWE increasing its stake in the 400MW Rampion wind farm in the UK to above 50%, and a ramp-up of production at the 857MW Triton Knoll wind farm in the North Sea (RWE owns 59% of that) as well as the 342MW Kaskasi project near the German island of Heligoland.
The group was the biggest single winner in the recent Round 4 auction for new offshore wind leases off the UK, where it secured 3GW of potential new projects.

RWE in 2020 was also doing well in the onshore wind and solar segments, where Ebitda rose by 7% to €472m from a 2019 pro-forma figure, amid the commissioning of some 800MW in new capacity despite delays in project completion at several plants because of the Covid-19 pandemic.

Nuclear exit windfall

Adding the less successful hydro/biomass/gas and the supply and trading segments, the adjusted Ebitda at RWE’s ‘core business remained flat at €2.68bn.

But adjusted Ebitda rose to €559m last year from €340m in 2019 at the company’s 'non core' coal and nuclear business, thanks to higher realised generation margins. RWE expects profit in that segment to actually rise further this year, to between €800m and €900m, due to higher hedged margins on forward sales of electricity generation.

Effects from €880m in payments RWE is due to receive in compensation for Germany’s nuclear phase out by the end of next year have not yet been included in the guidance.

But the company said it anticipates additional costs from the implementation of the German coal phase out, although the government has already pledged billions in compensation for coal miners and the operators of coal-fired power stations, such as RWE.

Adjusted Ebitda for the whole group rose to €3.24bn in 2020 from €3.02bn a year earlier, while adjusted net income reached €1.21bn. The company didn’t provide a pro-forma figure for net income for 2019.

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Published 16 March 2021, 10:19Updated 21 October 2023, 11:29
EuropeGermanyRWE