RWE suffers write-down due to low plant profitability

• 10 years ago (2014-01-29)
• Junior Isles

Europe 1061 North America 998

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Declines in the profitability of conventional power plants will force RWE to write down €3.3 billion worth of assets in the German utility giant’s 2013 earnings report, according to a company statement, with some analysts speculating that RWE will declare a net loss.

Falling earnings from conventional power generation make up roughly €2.9 billion of this reduction, with €1.5 billion relating to conventional power plants in the Netherlands, Belgium and the UK, another €200 million from RWE’s renewables business.

The continuing German shift to renewables, recessionary energy demand, and low wholesale power prices have all contributed to RWE’s troubles.

Gas power generation has also been hit by competition from the glut of cheap North American coal driven east across the Atlantic by the US shale gas boom.

French utility GDF Suez has similarly warned of a potential write down in its European power assets.

Meanwhile, Germany’s biggest utility E.On has seen net income fall by more than half, year-on-year, during the first three quarters of 2013.

“Throughout Europe, gas and hard coal-fired power stations in particular are under substantial economic pressure,” RWE’s chief executive, Peter Terium, commented.

Mr Terium confirmed that RWE’s cost cutting plan, including shedding assets and making job cuts and deferring capital expenditure, was essential “in order to increase earning power”.

The bleak outlook for conventional power generation will be compounded by the German government ruling out capacity markets for utilities.

Last week, German energy minister Sigmar Gabriel said he opposed capacity markets because the costs would be too high but was prepared to discuss regional solutions to prevent a loss of capacity.