RWE upgrades forecast after plus and minus

The German utility's bottom line has skyrocketed yet fallen into deficit. RWE takes the opportunity to turn up its full-year prognosis.

Photo: Thilo Schmuelgen/Reuters/Ritzau Scanpix

The reinstatement of the UK capacity market is an item lurking within the accounting spreadsheets of utilities. This also applies to RWE, which upgrades its full-year guidance for the same reason.

The company recorded a fall in revenue after this year's first nine months, down to EUR 9.1 billion from EUR 9.7 billion. Earnings before interest, taxes, depreciations and amortizations grew to EUR 303 million compared to EUR 1.442 billion from the same period last year.

The utility was also obliged, however, to book a deficit of EUR 254 million after the first three quarters of 2019.

Adjusted profit appears somewhat fairer and comes to EUR 854 million. Profit fared even better, when deducting for discontinued activities.

Here, the bottom line is written in black at a figure in excess of EUR 9 billion. This was mainly brought about by the transfer of Innogy equity, where RWE gained EUR 8.3 billion off the deconsolidation of Innogy's network and retail business. But Innogy is actually no longer a part of RWE , as the company was a part of recent major asset swap with Eon.

So far, RWE has not chosen to include the proceeds made off Eon's former assets in its adjusted financial statement, but the former does expect its adjusted EBITDA result from September and the rest of the year to land in the range of EUR 200-300 million.

Upgrades again

RWE consoles itself, though, with the fact that it awaits a cheque for EUR 230 million in suspended payments connected to the UK capacity market. Placing capacity at the disposal of this market was suspended in November 2018, when the EU Commission ordered a closer inspection of the entity. This meant that payments disappeared. However, now that the market has reopened, RWE informs that it has due income worth EUR 50 million from 2018 and EUR 180 million from this year.

Along with the positive operating result, this prompts RWE to make a slight upward revision to its 2019 guidance.

The new EBITDA forecast is between EUR 1.8 and 2.1 billion against the former spread of EUR 1.4 to 1.7 billion. The same applies for the adjusted profit post, now set to hit EUR 0.9-1.2 billion compared to the earlier interval of EUR 0.5-0.8 billion. The utility also upgraded guidance in connection with its Q2 results.

"Both the business performance to date as well as the prospects provided by our new strategy give us reason to be very confident. The positive development of the Group’s operating activities in the first half of the year continued in the third quarter. Furthermore, the reinstatement of the British capacity market will have a positive impact on earnings in the European Power segment," writes RWE Chief Financial Officer Markus Krebber in a statement on the interim report.

RWE is not alone is rejoicing about the reinstatement of the British capacity market and associated liquidity. The same is true for German utility Uniper, which has also upgrades its annual earnings forecast.

The new RWE

The big transaction between RWE and Eon was completed in October and entailed, among other things, the transfer of green energy assets owned by Eon to RWE. In return, Eon received assets including RWE 's stake in Innogy.

All these cleaner energy assets have made it possible for RWE to launch what it calls The New RWE, which is about shifting focus towards renewables and setting a carbon neutrality target for 2040.

RWE plans to boost its RE holdings, which currently total to more than 9 GW, with a further 2.6 GW under development. Moreover, RWE reports having a project pipeline containing around 20 GW.

The utility counts on making forward-looking investments worth EUR 1.5 billion per year.

English Edit: Daniel Frank Christensen

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