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RWE's pain over renewables

Tuesday, March 10, 2015 - 01:48

German utility RWE is ''not out of the woods yet,'' according to its chief executive. As Amy Pollock reports his comments follow a further fall in the group's operating profit as it grapples with falling prices and changes to Germany's energy policies.

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RWE is hurting. The German energy giant has warned its operating profit for the year could fall by as much as ten percent. CEO Peter Terium. (SOUNDBITE) (German) RWE CHIEF EXECUTIVE OFFICER, PETER TERIUM, SAYING: "We are not yet out of the woods. The dramatic situation in conventional electricity generation is too much of a burden." RWE and its rival E.ON are struggling with huge structural changes in the gas industry in Germany. Renewable energy sources are given priority access to power grids. Meaning RWE's conventional energy plants are not earning any money. This all follows the government's decision to end reliance on nuclear power after the Fukushima disaster. Robert Halver is from Baader Bank. (SOUNDBITE) (German) CAPITAL MARKET ANALYST FROM BAADER BANK, ROBERT HALVER, SAYING: "Fukishima still hurts them very much. The other issue is that oil and gas prices are currently rather moderate. So there are two issues (gestures) which need to be solved. In the long term, RWE will definitely succeed in solving them but for now, it hurts." RWE is dealing with the challenges head on. Its restructuring programmes will see job losses, lower shareholder payouts and asset sales as it drives down debt. Just this week the company finalised the 5.1 billion euro sale of its oil and gas production unit DEA to Russian billionaire Mikhail Fridman. But as the company's investments fall, their position as Germany's second biggest utility could be under threat. Commerzbank's Peter Dixon. (SOUNDBITE) (English) COMMERZBANK ECONOMIST, PETER DIXON, SAYING: "Somebody's going to have to invest an awful lot in renewable energy sources and that's going to be very costly for the energy companies, but also for consumers who are going to have to continue to subsidise this transition via tax payments." It's a bleak outlook. And RWE may yet follow E.ON's lead and break itself up as Germany's unprecedented shift to renewables continues.

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RWE's pain over renewables

Tuesday, March 10, 2015 - 01:48