Exclusive: Germany's RWE bets big on wind and solar in corporate overhaul

DUESSELDORF, Germany (Reuters) - RWE could triple investments in wind and solar power in a big expansion of its renewables business, its CEO told Reuters, days after the company announced it would break itself up to cope with a crisis in conventional energy generation.

Peter Terium, CEO of German power supplier RWE reacts during the annual shareholders meeting in Essen April 23, 2015.REUTERS/Ina Fassbender

Germany’s second-largest utility unveiled the major overhaul on Tuesday; it plans to hive off its healthiest divisions - renewables, grids and retail - into a separately listed entity.

The aim is to shield them from a crisis that has beset its conventional energy production business, stemming from the German government’s decision to close nuclear plants by 2022 and a slump in wholesale power prices that has hit the profitability of its coal and gas-fired plants.

In his first interview after the announcement of the restructuring plan - welcomed by investors as a smart move - Chief Executive Peter Terium said on Thursday that investments in renewable energy could triple to 1 billion euros ($1.1 billion) per year.

Terium, who took over as RWE boss in 2012, did not specify a timeframe for the increase, and said the group would not seek expansion at any price.

“We won’t burn money. It’s about being profitable.”

A latecomer to renewables, RWE is trying to catch up with rivals in what is currently the strongest-growing part of an otherwise shrinking power generation industry, where solar and wind power is fast replacing coal and gas-fired plants.

RWE made 8 percent of its core earnings (EBITDA) from renewables last year, compared with 18 percent at larger German peer E.ON, for example.


Terium gave the company’s first rough estimate of how the hived off business including the renewables division would perform, saying it could have annual earnings growth in the single-digit percentage range.

Growth at its renewables division will primarily be driven by further expansion of its onshore and offshore wind business, the 52-year-old Dutchman said.

He said he planned to expand RWE’s European onshore wind business by an average of 200 megawatts (MW) per year, with a focus on Germany, the Netherlands and Britain. RWE currently has about 2,000 MW of onshore capacity across the continent. The CEO did not give any targets for the planned offshore expansion.

Terium said the company would also consider investing in utility-scale solar projects in the 50-250 MW range.

Asked about possible locations for such projects, he said California, the southern United States, the Middle East and northern Africa region would be good areas to start.

Of the Middle East, Terium said: “The region wants to move away from oil and increasingly bets on solar energy.”

He added that RWE would take part in a tender in the region for a solar plant worth several hundred megawatts, declining to be more specific.

RWE’s restructuring plan still requires approval from the company’s supervisory board at its Dec. 11 meeting.

($1 = 0.9253 euros)

Editing by Pravin Char