RWE slashes jobs, costs to escape industry turmoil
FRANKFURT/DUESSELDORF (Reuters) - German utility RWE (RWEG.DE) said it would cut more jobs and trim capital spending as it joined peers in warning of a deep crisis in Europe's energy industry that would keep a lid on growth in the foreseeable future.
RWE plans to cut about 6,750 jobs in the 2014-2016 period, bringing the total since 2011 to about 13,000, roughly 18 percent of its workforce at the time.
The job cuts are part of efficiency measures over the next four years that will boost earnings by at least 500 million euros ($670.22 million) from 2017 onwards, the company said on Thursday. It aims to reduce capital expenditure from 4.5 billion this year to 3.0 billion in 2016.
"Many power plants are no longer able to cover their costs due to a decline in forward prices in Continental European electricity trading," the company said.
On Wednesday, peers E.ON (EONGn.DE) and GDF-Suez (GSZ.PA) both warned of a prolonged industry crisis in Europe, caused by plunging wholesale power prices and an uncontrolled boom in renewables. E.ON cut its 2013 core profit forecast and GDF-Suez said it would write down the value of European power assets.
Shares in RWE, which are down 13 percent year-to-date, were indicated 2.6 percent lower in pre-market trade at 0700 GMT (2:00 EDT).
RWE, along with peers E.ON and EnBW (EBKG.DE), has seen its business come under pressure from a decline in wholesale power prices, the growth in renewables and weak demand for energy in Europe.
The renewables boom is a particular problem for Germany's utilities, as solar and wind power takes priority over coal and gas when being fed into the grid, reducing the hours that conventional power plants can run.
This has led RWE to cut its dividend and announce the shutdown of thousands of megawatts worth of plant capacity in recent months, warning that more may follow if the government does not come up with a solution.
Reflecting the poor trend in Europe's energy markets, RWE also gave its first profit guidance for 2014, expecting earnings before interest, tax, depreciation and amortization (EBITDA) of 7.6-8.1 billion euros ($10.2-$10.9 billion), down significantly from an expected level of around 9 billion euros this year.
RWE sees next year's operating result at 4.5-4.9 billion euros next year, down from a forecast 5.9 billion in 2013.
Analysts expect on average 2014 EBITDA of 8.1 billion euros and an operating result of 4.9 billion euros.