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

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.

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

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.

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.

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.