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RWE: Positive interim result in a difficult environment
- Significant decrease in electricity and gas sales volumes
- Outlook adjusted due to sale of RWE Dea
As expected, the extremely mild winter and ongoing crisis in conventional electricity generation resulted in earnings shortfalls at RWE AG in the first quarter of 2014. At €2.6 billion, EBITDA was significantly down on the previous year's figure. The operating result fell by 18% to €1.9 billion. Recurrent net income was €838 million, down 36% on the previous year. External revenue fell 9% to €14.7 billion.
"Even though, as expected, the first quarter reflected the difficult environment in the energy sector, I can take positive stock nevertheless," says Peter Terium, CEO of RWE AG. "We passed a major milestone en route to selling RWE Dea with the signing of the sale agreement. We are also pleased to have brought the price revision relating to our gas purchasing agreement with Gazprom to a successful conclusion. We have come up with a solution which ensures that the contract will not curtail our earnings until the next revision, which is scheduled for June 2016."
Electricity and gas sales volumes down
In the first three months of the year, RWE sold 67 billion kilowatt hours (kWh) of electricity to external customers, 6% less than in the previous year's period. This was mainly due to the decline in generation volumes to 52 billion kWh, compared to 63 billion kWh in the first quarter of 2013. This resulted in less electricity being sold by RWE from its own power stations on the wholesale market.
Gas sales fell by 19% to 103 billion kWh. The unusually mild winter weather clearly left its mark, especially on the residential and commercial customers business. The Group suffered a huge decline in volumes in this supply segment.
Capital expenditure 17% up year on year
The RWE Group invested €898 million in capital, or €131 million more than in the equivalent period last year. The expansion and modernisation of its electricity generation capacity remain the main focus of the company's investing activity. The most important individual projects are the dual-block hard coal power stations at Hamm and Eemshaven and the two offshore wind farms Gwynt y Môr off the north coast of Wales and Nordsee Ost near Heligoland.
Outlook for 2014
The impending sale of RWE Dea will reduce the Group's net debt. RWE is expecting net debt to be in the order of €26 billion at the end of 2014 (previous year: €30.7 billion). The leverage factor, i.e. the ratio of net debt to EBITDA, should be much higher than the previous year's figure of 3.5, since EBITDA for 2014 is expected to be lower than in 2013.
The forthcoming sale also makes it necessary for RWE to adjust its outlook for the entire year 2014; previous outlooks included the contributions to earnings made by RWE Dea. RWE now estimates EBITDA and an operating result of €6.4 to 6.8 billion and €3.9 to 4.3 billion, respectively. The revised forecast range for recurrent net income is between €1.2 and 1.4 billion. This no longer includes the operational performance of RWE Dea, but it does include the interest earned on the sale price between 1 January 2014 and the date that the transaction is completed. The transaction is still subject to approval by the authorities in several countries in which RWE Dea operates. The process is expected to be concluded later in the year.
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that RWE has made based on information available to the company at the time this document was prepared. In the event that the underlying assumptions do not materialise or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, RWE cannot assume responsibility for the accuracy of these statements.
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