Solid performance in the first half of 2016

Essen, (PresseBox) -
 Moderate decline in H1 operating result
 Forecast for 2016 Group earnings confirmed
 Significant losses in the trading business
 Restructuring of UK supply business proving successful


RWE has shown a solid performance in the first half of 2016. In the first six months of the current fiscal year, the RWE Group’s results declined only moderately compared to the same period last year. EBITDA fell by 5% to €3.0 billion, while the operating result was down 7% to €1.9 billion. This was primarily due to the trading business where, after a very successful start to the year, significant unexpected losses were recorded in the second quarter. By contrast, the Conventional Power Generation Division posted a significant rise in its operating result. One of the key success factors was the ongoing efficiency-enhancement programme. Added to this were one-off effects from the sale of property. The Supply Division likewise enjoyed positive development. This can be attributed in part to lower purchase costs for electricity and gas. Furthermore, the comprehensive restructuring measures in the UK supply business are already bearing fruit. Peter Terium, Chief Executive Officer of RWE AG: “The restructuring programme in our UK supply business has got off to a good start. The operational improvements are on track, including those to meet the customer service goals agreed with the UK regulatory authority Ofgem. This is also increasingly reflected in our customer numbers: our competitive position in the UK residential sector has stabilised since the significant customer losses suffered last year.”

Adjusted net income amounted to €598 million, up 10% year on year. This was mainly due to an extremely low effective tax rate of 8%, a one-off effect resulting from the capitalisation of deferred taxes in connection with the reorganisation of the RWE Group. External revenue dropped by 4% to €23.9 billion.

Reorganisation of the RWE Group on track

In the first half of 2016, RWE reached some important milestones in the comprehensive realignment of the Group, which continues to run according to plan. RWE’s new subsidiary for renewables, grids and retail commenced its business activities as scheduled on 1 April 2016. It is temporarily called “RWE International SE” and is scheduled to operate under its definitive name “innogy SE” from 1 September onwards. Around 10% of innogy’s shares shall be listed on the market via a capital increase before the end of the year. “At times, up to 1,500 people at RWE have been working on the Group’s realignment,” said Peter Terium. “Just six-and-a-half months after the Supervisory Board gave the go-ahead, the legal reorganisation has already been completed and the new brand has been launched. I am extremely proud of this accomplishment and would like to thank all those involved for their hard work and dedication,” Terium added.

Power generation up 5% year on year

In the first half of 2016, the RWE Group produced 107.1 billion kilowatt hours (kWh) of electricity, 5% more than in the same period in 2015. The main reason was that the market conditions for its gas-fired power stations improved, resulting in a substantial increase in their utilisation, especially in the United Kingdom. More electricity was also produced from renewables, with new wind farms playing a key role.

Electricity sales volume up 4%, gas supply volume 7% down year on year

During the first six months of the year, the RWE Group supplied 133.5 billion kWh of electricity to external customers, 4% more than the same period last year. This was mainly the result of winning new customers in the business with German distributors as well as supplying more electricity to existing customers.

Gas sales decreased by 7% to 145.7 billion kWh. This was partly due to some customers of the German distributors purchasing more gas from other suppliers. Declines were also experienced in the residential and small commercial enterprise segment, caused primarily by customer losses and the trend towards energy savings.

Drop in capital expenditure on power generation capacity

At €826 million, the RWE Group’s capital expenditure in the first six months of 2016 was 30% lower than the figure recorded in the equivalent period last year. Capital expenditure on property, plant and equipment in the Conventional Power Generation Division was less than half of the 2015 level, which included substantial investments to upgrade the UK gas-fired power stations Pembroke and Staythorpe. Capital spending was also lower in the Renewables Division due to the completion of the offshore wind farms Gwynt y Môr and Nordsee Ost in 2015. More than half of total capital expenditure was allocated to the network infrastructure, the level of which was nearly unchanged from the previous year. Net debt rises to €28.3 billion
As of 30 June 2016, the RWE Group’s net debt amounted to €28.3 billion, significantly higher than at 31 December 2015 (€25.5 billion). This rise was in part due to the negative free cash flow. Furthermore, changes in market interest rates made it necessary to increase provisions for pensions compared to the end of 2015.

Headcount reduced by nearly 500

RWE had 59,283 people on its payroll as of 30 June 2016 (converted to full-time positions). This is 479 fewer than at the end of 2015 and was in great part due to streamlining measures, particularly in the Conventional Power Generation Division.

Group earnings forecast unchanged

The earnings outlook for the RWE Group’s business performance this year, as published in March and confirmed in May and again on 1 August, continues to apply:
EBITDA of €5.2 billion to €5.5 billion is still expected, together with an operating result of €2.8 billion to €3.1 billion, and adjusted net income of €0.5 billion to €0.7 billion. However, two adjustments must be made to the forecast at the segment level. The outlook for the Supply Division, where a moderate decline had been originally anticipated, is now more optimistic: the operating result is likely to be in the order of last year’s level, in particular thanks to the positive developments in the United Kingdom.

In contrast, the Trading/Gas Midstream Division will probably close the year much lower than in 2015 due to the unexpectedly weak second trading quarter. A significant improvement in earnings had previously been expected. The forecast for the other segments remains in place.

Legal Disclaimer

This document contains certain forward-looking statements within the meaning of the U.S. federal securities laws. Especially all of the following statements: Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items, statements of plans or objectives for future operations or of future competitive position, expectations of future economic performance, and statements of assumptions underlying several of the foregoing types of statements are forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”, “should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect the judgment of RWE’s management based on factors currently known to it. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legal conditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency  for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortisation of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integrate successfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange and to all additional information published on RWE’s Internet web site.

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