German RWE Income to Hit FY Guidance
German utility RWE expects to hit the upper end of its forecast for 2017 after good performance in the first six months of the year, it said August 14. Its adjusted earnings before interest, tax, depreciation and amortisation (Ebidta) was €3.2bn ($3.8bn), up 7% and adjusted net income was €2.7bn, up 35% compared to same prior-year period. It also paid off €1.2bn of debt.
RWE CEO Rolf Martin Schmitz said that the company should end the fiscal year towards the upper end of our forecast ranges and the key indicators also demonstrate a solid foundation for the future. All of the segments made positive contributions to earnings, although there was decline from its nuclear and lignite division, owing to lower wholesale prices, and no recovery is expected just yet.
The company also benefited from the nuclear fuel tax refund, when the German Constitutional Court ruled that the law on the nuclear fuel tax was unconstitutional and retroactively void.
Adjusted net income – which does not include the nuclear fuel tax refund – totalled €809mn and it expects adjusted Ebitda of between €5.4bn and €5.7bn, and adjusted net income of between €1.0bn and €1.3bn. According to current planning, the company expects to close the year underway at the upper end of these forecast ranges.
Schmitz said RWE "used the first half of this year to further develop our company, in line with our strategy,” a key element of which is security of supply. It has taken initial planning steps towards construction of gas-fired power plants and a battery storage facility at the site of a former coal plant at Tilbury, in the UK. In the Netherlands, the company is retrofitting power stations for the use of biomass. This state-subsidised area of business offers long-term security for both investments and returns. Another innovative solution is the marketing of decentralised generation capacities from emergency generators by Supply & Trading.
In parallel, optimisation of the power plant portfolio ensures a very high degree of efficiency in power generation and flexibility of the power stations, it said. The close relationship between trading and power stations means that the required generation capacities can be provided exactly when they are needed, when the highest revenues can be generated.
Adjusted Ebitda in the European power division was €222mn, which after allowing for last year's special items of €132mn was an improvement on last year. The division is performing better than planned. The margins and dispatch of gas-fired power stations are higher than expected. Hard coal-fired power stations remain under pressure.
However, RWE is countering this by pressing ahead with efficiency enhancement measures. The commercial optimisation of power plant dispatch also made a strong contribution to the division’s earnings. RWE now anticipates a significantly improved result from this segment in 2017, in particular as one-off revenue from the sale of a power station site in the UK will also be recognised in the second half of the year. A decline in this division’s earnings was originally forecast.
Adjusted Ebitda in the Supply & Trading Segment amounted to €131mn, whereas earnings in the first half of 2016 had been in negative territory. Consequently, business performance in this segment is now back in line with expectations, said RWE. Averaged over the medium term, Supply & Trading is expected to have sustained earnings potential in the order of roughly €200mn/yr.
The financial investment innogy boosted its adjusted Ebtida by 2%. For 2017 as a whole, innogy expects to close moderately above last year.
William Powell