RWE profits plummet by more than a fifth

Npower owner RWE has reported a sharp decline in profits in the nine months to the end of September.

The German energy giant blamed the fall on the rising cost of maintaining its network infrastructure in continental Europe and the poor performance of its trading division in the second quarter.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) plunged by 13.2 per cent year-on-year to ‎€3,821 million. Operating profits plummeted by more than a fifth (20.1 per cent) to €2,116 million.

“In view of the difficult conditions, above all in conventional electricity generation, we recorded respectable earnings in the first three quarters,” said the group’s chief financial officer Markus Krebber.

EBITDA for the conventional power generation division fell by 10 per cent to €1,047 million, although its operating profits rose by 7 per cent to €435 million. RWE said the division benefitted from ongoing improvements in efficiency and the sale of land in the UK, “some of which was intended as sites for new power plants but is now surplus to requirements”. However, the results were held back by the lower prices it was able to secure for power generated by its nuclear and lignite-fired plants when compared to 2015.

The renewables division saws its EBITDA shrink by 2.4 per cent to €480 million, and its operating profits by 14.1 per cent to €244 million. The group said the division was impacted by lower wholesale prices as well as the depreciation of the sterling versus the euro. It noted that the equivalent results from last year had been buoyed by the sale of the network infrastructure of Gwynt y Môr – its windfarm off the coast of Wales.

EBITDA for the supply division, which includes its UK retail brand Npower, dropped by 0.4 per cent to €699 million, and its operating profits shrank by 8.4 per cent to €547 million. Reiterating what it said in its previous results in August, RWE declared its restructuring of Npower is “beginning to bear fruit, after the 2015 operating result was curtailed by process and system-related billing problems”. However, this was offset by “a decline in income due to customer losses”.

The results come shortly after RWE completed the separation of its renewables, supply and grids divisions from the rest of the business into the new company Innogy. Shares in the company began trading on 7 October on the Frankfurt Stock Exchange following “the largest IPO [initial public offering] in Germany since the end of 2000.

Stocks with a combined value of €4.6 billion were issued, generating revenues of €2.6 billion for RWE and with the remaining €2 billion going to Innogy itself. RWE has retained a 76.8 per cent stake in the new company.

October also saw the German cabinet adopt a draft law calling for the federal government in the country to take responsibility for handling and financing the intermediate and final storage of radioactive waste.

According to the draft legislation, plant operators must contribute €17.4 billion to a fund to pay for the storage and can shell out a further €6.2 billion to be released from any liability for cost increases. RWE said it expects its share to amount to €6.8 billion. “In view of our very robust liquidity position, this will involve paying as quickly as possible,” said Krebber.