RWE to cut dividend in face of shrinking power generation

• 10 years ago (2013-09-21)
• David Flin

Europe 1068

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RWE, Germany’s second-largest utility, reduced dividend payments after the country’s shift to renewable power curbed profit from gas- and coal-fired power plants. RWE will pay €1 on each share at the 2014 annual meeting, half of what it paid in 2013. RWE plans to cut the portion of recurrent net income earmarked for dividends to 40-50 per cent, compared to its previous target of 50-60 per cent. RWE said that it is cutting the dividend: “In the light of the deterioration in the earnings prospects of the conventional electricity generation business.”

Ingo Becker, an analyst at Kepler Cheuvreux, said: Given RWE’s dividend policy in the past, we need to assume the €1 is to be kept in coming years.” Analysts at UBS AG said that even with the dividend cut, RWE’s balance sheet remains overly stretched.

Bloomberg said that RWE’s decision is driven by a cautious outlook on thermal power profits and political intervention risks. It said that utilities with a high proportion of thermal power generation, including EON, may also choose to review their dividend policies.