BERLIN: Core earnings at RWE, Germany’s second biggest utility, fell by 7 per cent in the first half of this year as the rise of renewable energy depresses wholesale power prices.
Earnings before interest, tax, depreciation and amortisation declined from €3.4bn to €3.2bn, writes the FT’s Jeevan Vasagar in Berlin.
Adjusted net income declined by nearly 28 per cent to €543m. The company contributed the sharp decline to a combination of weak earnings and a high tax rate. The utility’s outlook for the year is unchanged.
RWE predicts earnings before interest, tax, depreciation and amortisation will be between €6.1bn and €6.4bn in 2015, a decline of 14 per cent on the prior year,and anticipates an operating result for the year of between €3.6bn and €3.9bn, a 10 per cent drop on the prior year.
The dramatic shift to renewable energy, which now accounts for more than a quarter of electricity generation in Germany, has led to a glut of power production that has pushed down wholesale prices.
Earnings before interest and and tax at RWE’s renewables division rose from €81m to €233m, with the commissioning of new wind farms.
We will continue on this path. These new facilities increase the prospect of our renewables subsidiary doubling its operating result this year.
On Wednesday, rival German utility Eon posted a 21 per cent decline in underlying net income, to €1.2bn, in the first half of the year. Eon is in the midst of a major restructuring, spinning off its nuclear and fossil fuel generation to concentrate on renewables.
RWE has opted to cut jobs and divest assets including its oil and gas exploration and production unit Dea. Analysts are sceptical about whether an Eon-style split would work for RWE, as the company relies heavily on coal for its power generation.
