RWE AG (FRA:RWE)

QUOTE AND NEWS
Wall Street Journal  Dec 12  Comment 
German utility RWE AG said it will start calculating its dividends based on operating cash flow, debt and earnings, starting next fiscal year.
OilVoice  Dec 10  Comment 
RWE Dea doubled its oil and gas production in Egypt. North Africa is a strategic core region for Dea. The company is one of the leading foreign investors in Egypt and produces oil and gas in the count
Financial Times  Dec 1  Comment 
Germany’s second-biggest utility says it can ‘generate value along the entire value chain’
SeekingAlpha  Nov 14  Comment 
Reuters  Nov 14  Comment 
* Deutsche Bank sees dividend fears as "overdone" -analyst
MarketWatch  Nov 13  Comment 
London Stock Exchange shares rise Thursday and are among the stocks seeing significant moves in European trade.
Wall Street Journal  Nov 13  Comment 
Shares in RWE sank, even though the German power company reported a net profit in the first nine months of the year, after it said it was no longer sure it would still complete the sale of oil and gas unit Dea this year.
newratings.com  Nov 13  Comment 
BRUSSELS (dpa-AFX) - The German market is trading higher on Thursday, following a weak session on the previous day, as earnings news from the region continued to influence investor sentiment. On the economic front, final data from Destatis showed...
Wall Street Journal  Nov 13  Comment 
Shares in RWE sank, even though the German power company reported a net profit in the first nine months of the year, after it said it was no longer sure it would still complete the sale of oil and gas unit Dea this year.




 

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.

7 main divisions
  • 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
4 new divisions
  • 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%
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2011 Second Quarter - Nearly every major financial metric fell with quarterly operating income showing up as a loss for the first time in at least the last year (was 1.086B euro in the same quarter in 2010 increasing to 2.819B euro in the qtr ended March 2011/it fell to -25M in the 2nd qtr). Assets showed a considerable decrease, down 9.10% in just the last three months. About the only results that showed growth; workforce (up 2.6% greatest quarterly growth in almost a year though it did grow substantially in 2009) and capital expenditure (up over 7%, expansion in Netherlands/Belgium , acquired 30% of a the Borselle Plant May 17, 2011). During the quarter RWE sold 74.9% of Amprion GmbH for 700M euro on July 14, 2011 and 50% of Zandvliet Power N.V (jv with Electrabel) to BASF.

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

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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. 1.0 1.1 RWE AG Group Annual Report 2010 (2011).
  2. A Water Stock That Works (2010-08-24).
  3. RWE to Sell American Water Works Unit in IPO by 2007 (2006.03.24).
  4. American Water Works says RWE will sell shares (2009).
  5. Windmill Boom Cuts Electricity Prices in Europe (2010-04-23).
  6. RWE Dea:35 Years of Commitment to Egypt (June 2009).
  7. 7.0 7.1 2009 Annual Report
  8. RWE AG Group Results Jan-June 2011 (August 27, 2011).
  9. 2006 Annual Report
  10. 2007 Annual Report
  11. 2010 Interim Report
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