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Munich's utility singles out offshore wind in renewable push

MUNICH (Reuters) - Stadtwerke Muenchen (SWM), Germany’s biggest municipal utility, plans to expand its presence in the booming offshore wind sector, its CEO said, in a bid to replace loss-making gas and power plants it says will cease to exist at some point.

A ship sails past the Barrow offshore 90 megawatt wind farm, developed by British and Danish energy groups Centrica and DONG Energy, off the coast of Cumbria, England April 12, 2011. REUTERS/David Moir

Despite its small size, SWM has emerged as a serious player in Europe’s renewable industry, having already spent about 3 billion euros ($3.3 billion) on renewables. Eight times as big in terms of core earnings, Germany’s largest utility E.ON has invested little more than three times that sum.

“We want to keep on growing in the area of offshore wind, ideally through joint ventures,” SWM Chief Executive Florian Bieberbach told Reuters in an interview. “So far, we mostly own minority stakes, but we feel quite confident at this stage and would be able to hold a majority if it fits.”

SWM owns minority stakes in three offshore wind parks, DanTysk, Gwynt y Mor and Global Tech I, and also holds 49 percent in the Sandbank project, whose completion is planned for next year.

The group, which powers Munich, Bavaria’s capital and Germany’s third-largest city, spends about 400 million euros a year on renewables, about 40 percent of its total investments.

Most of this goes toward offshore wind parks, which cost at least 1 billion euros and have become a magnet for investors keen on the risky, but regulated, assets.

“It’s been more than 10 years since we’ve invested in the area of conventional energy generation,” Bieberbach said. “At the time we had the core belief that renewables are the future while traditional power generation will die out sooner or later.”

Renewables accounted for about a third of SMW’s power production and about a fifth of its operating profit last year. This compares with 5 percent and 13 percent, respectively, at RWE, Germany’s second-biggest utility, which has followed E.ON in plans to split up its business.

Bieberbach ruled out such a move for SWM, but said the situation in the power market, which has suffered from ultra-low wholesale power prices, remained tense, particularly for power and gas plants.

SWM had to book impairments of 893 million euros on its assets in 2015 as a result of the crisis and Bieberbach said further writedowns were likely this year, albeit not of the same magnitude.

($1 = 0.9085 euros)

Editing by David Holmes

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