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German power giant RWE says profits down in first-half

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(Globalpost/GlobalPost)

RWE, Germany's second-biggest power supplier, said on Thursday that its profits fell in the first six months of the year owing to low demand for heating and weak electricity prices.

"The mild winter and the resulting low demand for heating, together with the continuing low level of prices on the electricity markets, led to a significant decline in RWE's earnings for the first half of 2014," the group said in a statement.

Bottom-line net profit plunged by 62 percent to 749 million euros ($1.0 billion).

The figures are the latest in a string of weak results from European power-generating groups which have had to make big asset write-downs because of deep turmoil in the European industry.

One background factor causing sector-wide upheaval is the effect of the shale-energy boom in North America, which has depressed the price of coal, in turn making many gas-powered facilities in Europe uncompetitive.

At RWE, underlying or operating profit tumbled 40 percent to 2.271 billion euros on 9.6-percent drop in revenues to 25.087 billion euros.

RWE chief executive Peter Terium said that the group would take more power stations offline in face the difficulties facing the conventional power sector.

"Because of the significant deterioration in prices on the wholesale electricity market, RWE Generation plans to decommission around 1,000 megawatts (MW) of additional generation capacity by 2017 as well as terminating further supply contracts for the use of around 500 MW of capacity," he said.

"This takes the generating capacity of power stations that RWE is either totally or partially taking offline in continental Europe or no longer utilising on account of the difficult market conditions for conventional power generation to around 9,000 MW," he said.

"Conventional power generation is losing ground -- not just at RWE," the CEO insisted.

Data from the Federal Network Agency indicated that, up to 2018, more secured power station capacity will have to be taken offline than is added through capital investment.

"This does not bode well for security of supply, to which wind and solar can make little contribution," Terium said.

Despite the fall in first-half profits, RWE said it is sticking to its forecast for the full year.

Group sales would amount to around 51 billion euros, underlying profit to 6.4-6.8 billion euros and net profit to 1.2-1.4 billion euros, the group said.

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RWE

http://www.globalpost.com/dispatch/news/afp/140814/german-power-giant-rwe-says-profits-down-first-half