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RWE AG (FRA:RWE) |
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WIKI ANALYSIS
RWE (FRA:RWE, ETR:RWE, NASDAQ:RWEOY, BIT:RWE) is a German utility company with an electricity and gas business made up of upstream (production/generation) and downstream (marketing, distribution and sales) operations (for both electricity and oil,gas). The company which has a vertically integrated electricity business (gives it more flexibility) also engages in coal, oil and emission allowances trading. In 2009 restructuring and realignment of its main divisions added 4 new ones; Amprion, Thyssengas, RWE Technology and Internal services. Heat pumps (in 9000 homes) and smart meters it provides to some customers helped save energy use while reducing carbon release. Workforce on June 31, 2011 was 72,700, up 2.6% over just the last 6 months (70,856 on December 31, 2010). The December figure represents an increase of 130 over 2009 (70,726) and 4,948 more than in 2008 (65,908); employees increased each year between 2006 and 2008.[1]
In 2009 it entered the Turkish electricity market (as a joint venture with Turcas Petrol it gained 70% control of a gas turbine power plant) and added to its dwindling reserves and resources with the acquisition of a controlling stake in the Breagh natural gas field. 2009 was also the year the company fully divested itself of American Water Works (purchased it for $4.5 billion in 2003 but out of frustration with utility regulators/rate hikes begun to spin it off in 2007/2008).[2][3][4] Subsidiary Innology started/acquired 2 wind farms in Belgium and Wales (the largest won't start operating until 2013) which is key since wind power has been credited with energy price reductions in Europe (and thus popular with people).[5]
As an energy leader in key EU markets (top 3 producer in Germany, Netherlands and the UK) it is a top 3 electricity and gas supplier in Germany, Netherlands, Hungary and slovakia top 4 in the UK, and leading gas supplier to the Czech Republic, 6th largest electricity supplier to Poland. Also notable is the fact that it is the largest German investor in Egypt.[6] In Southeast Europe it is focussed mainly on renewable energy production/growth while the middle eastern, turkish regions are considered key growth markets for various business segments. [7]
As of september 21, 2009 it is a member of the Dow Jones Euro Stoxx 50 Index (SX5E) which is an index made up of the 50 largest European companies by free float market cap.
Company Overview
RWE operates in 11 segments, 7 core and 4 new ones that were established in 2008-2009.
- Germany - Power Generation is managed by RWE Power. 10 subsidiaries deal with the sales and distribution networks.
- Netherlands and Belgium - Subsidiary RWE Essent runs operations.
- UK - RWE npower manages all business.
- Central and Eastern Europe - 5 subsidiaries (2 gas ones in the Czech Republic, 1 each in Poland, Slovakia and Hungary managing all power activity)
- Renewables - RWE Innology
- Upstream gas & oil - RWE Dea
- trading, gas midstream - RWE Supply & Trading
- Amprion - Electricity transmission system operator (unbundled)
- Thyssengas - Logistics company for RWE's natural gas business in Germany. In order to settle an EU antitrust investigation RWE had to agree to sell Thyssengas.
- RWE Technology
- Internal services
Business & Financials
Due to company realignment and restructuring in 2009 the assets and revenue of certain subsidiaries changed substantially (RWE Energy isn't a holding company anymore, realignment transferred €13.6 billion worth of assets to the Energy division, net €5.4 billion lost by Essen and Aqua International). Cross currency and interest rate swaps were made as part of its hedging strategy and a nuclear mutual benefit agreement commitment meant RWE AG had to have €2.244 billion on hand to ensure that any potential damages at its nuclear plants would be covered.
| Key Financial Metrics (€ million) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010[1] | 1HFY10 | 1HFY11[8] | % Change (Interim 10-11) |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 39,487 | 42,554 | 42,507 | 48,950 | 47,741 | 53,320 | 27,354 | 27,457 | 0.4% |
| EBITDA | 7,095 | 7,172 | 7,902 | 8,773 | 9,165 | 10,256 | 6,150 | 4,622 | (24.8)% |
| Total Assets | 109,458 | 49,434 | 40,792 | 45,790 | 48,424 | 93,077 | 89,071 | 88,869 | (0.23)% |
| Net Income | 2,231 | 3,847 | 2,659 | 2,558 | 3,571 | 3,308 | 2,043 | 1,590 | (22.2)% |
| Capital Expenditure | 4,143 | 4,728 | 4,227 | 5,693 | 15,637 | 6,643 | 2,567 | 2,760 | 7.52% |
| Earnings/Share | 3,97 | 6,84 | 4.73 | 4.75 | 6.70 | 6.20 | 3.83 | 2.98 | (22.2)% |
| Dividend/Share | 1,75 | 3.50 | 3.15 | 4.50 | 3.50 | 3.50 | na | na | na |
| Net Debt | 11,438 | 6,864 | 5,056 | 18,659 | 25,787 | 28,964 | 29,808 | 30,084 | 3.9% |
2010 - Workforce, revenue, profit (though down slightly by 7.4%) moody's rating (A2), assets (stable/down 0.4%) and even EBITDA (up 11.9% to a record high of over 10B euro) remained strong however the company's market capitalization was hit hard (down 26% on the year from 38B to 28B euro). Most of the boost in total revenue came from the Netherlands/Belgium business unit (from 1957M to 7061M euro) which expanded operations; revenue from trading/gas midstream rose 10.4% to 28.983B euro. All five regions in which RWE operates showed increases in operating cash flow (up 23.9% in Germany almost coming from power generation, up 75.45% in the UK to 679M, up 30.29% in CE and SE Europe), though overall operating cash flow fell 3.7% due to a 1.43B loss in the trading/gas midstream business (+0.58B in 2009).[12]
2009 Key financial metrics were steady as compared to 2008 with the exception of net income (40%), cash flows (down 40%), capital expenditure (up 174.7%) and net debt (up 38.2%). Overall electricity production was down (a plant shutdown was partly to blame) however power generated using renewable fuels was up slightly (up to 1.5% from 1.3% of total electricity production). Although total electricity sales were down those supplied by the company excluding what was procured through trading activities were nearly unchanged due to new customers in Germany. Crude oil and natural gas production was lower because reserves in the North Sea are close to being exhausted (also fell in Germany and Egypt but was higher in Norway). RWE shares gained an above average 16% in 2009 as compared with other DAX 30 listed companies. Carbon permits/EU allowances were down 21 percent (carbon emissions down 13.4%) because less demand led to lower production.
Production and Sales
1HFY10 Electricity production up 24% on account of improved market conditions for gas and coal power plants in Germany, addition of wind power generation from wind farms in Essen, and gas fired power UK power plants (the market for coal powered plants Worsened in the UK). Electricity sales rose slightly in the UK because of a colder winter.
Competition
References
- ↑ 1.0 1.1 RWE AG Group Annual Report 2010 (2011).
- ↑ A Water Stock That Works (2010-08-24).
- ↑ RWE to Sell American Water Works Unit in IPO by 2007 (2006.03.24).
- ↑ American Water Works says RWE will sell shares (2009).
- ↑ Windmill Boom Cuts Electricity Prices in Europe (2010-04-23).
- ↑ RWE Dea:35 Years of Commitment to Egypt (June 2009).
- ↑ 7.0 7.1 2009 Annual Report
- ↑ RWE AG Group Results Jan-June 2011 (August 27, 2011).
- ↑ 2006 Annual Report
- ↑ 2007 Annual Report
- ↑ 2010 Interim Report
- ↑
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