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INTERVIEW-RWE Innogy expects strong profit growth, says Britain still attractive
July 17, 2014 / 2:25 PM / 3 years ago

INTERVIEW-RWE Innogy expects strong profit growth, says Britain still attractive

* Innogy seeks share of 10-15 pct in group profit mid-term

* Sees double-digit pct growth in operating earnings in 2015

* Aims to decide on Galloper, Nordsee One by end-2014 (Adds details on Britain, offshore projects, quotes)

By Christoph Steitz and Tom Käckenhoff

ESSEN, Germany, July 17 (Reuters) - RWE Innogy, the renewables arm of RWE, expects profits to grow strongly over the next two years and is interested in investing in Britain even though the company abandoned a major windfarm project there last year.

“We see our share of RWE’s total operating profit standing at about 10-15 percent in the mid-term, this corresponds with the planned level of investment,” Hans Buenting, chief executive of RWE Innogy, told Reuters in an interview.

A latecomer to renewables, RWE’s green business is much smaller than at larger peer E.ON, where renewables accounted for 15.4 percent of last year’s core earnings.

Innogy, which plans to invest 1 billion euros ($1.35 billion)($1.35 billion) in 2014-2016, had operating earnings of about 200 million euros last year, accounting for less than 4 percent of the RWE group total.

Buenting said RWE Innogy’s operating profit is forecast to grow in the double-digit percentage range next year, with at least single-digit growth in 2016, but growth would be lower after that.

He said the big jump in earnings next year was primarily due to the fact that offshore wind parks Gwynt y Mor and Nordsee Ost -- built in Liverpool bay and the German North Sea, respectively -- will be connected to the grid and start to deliver profits.

“We’re now reaping what we have sown in the first six years,” Buenting said.

Innogy was set up by RWE in 2008, responding to the growing importance of renewable energy while its traditional business of selling electricity from coal and gas plants has come under intense pressure. This is due to weak energy demand across Europe and record low wholesale prices, the result of a major expansion in solar capacity in Germany.

Overall, RWE owns 3.5 gigawatt (GW) of renewable capacity, accounting for about 7 percent of its generation capacity. Two thirds of that consists of onshore and offshore wind power, with hydro power representing more than a fifth.

BRITAIN IS ATTRACTIVE

Britain and Germany are RWE’s two biggest renewable markets, accounting for more than three quarters of its renewable generation capacity.

But last November, uncertainty in Britain over energy policy led RWE to scrap plans to build Atlantic Array, potentially the world’s largest wind farm.

RWE said at the time the Atlantic Array project off southwest England, which would have featured up to 240 wind turbines and powered as many as 900,000 British homes, no longer made economic sense in current market conditions.

RWE’s decision had followed political wrangling over green energy policies in Britain, where energy companies have come under pressure over rising household energy bills. This has created uncertainty for potential investors in renewables.

British utility SSE said in March it would no longer invest in the 340 megawatt (MW) Galloper project off the coast of Suffolk, in eastern England which is a 50:50 partnership with RWE Innogy.

But Buenting said he was working with SSE to find a new partner, hoping to make an investment decision for the project by the end of the year.

“The British market is attractive,” he said.

Innogy is also in talks with investors about the first phase of its planned Nordsee One offshore wind park in the North Sea, comprising 325 MW and entailing 1.2-1.3 billion euros of investment, Buenting said, adding he hoped to make a decision at the end of the year.

If that were to happen, construction of the first phase -- in which RWE would likely own not more than a quarter -- would start in 2016, he said.

($1 = 0.7394 Euros)

Additional reporting by Vera Eckert. Editing by Jane Merriman

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