RWE’s chief executive Peter Terium has admitted the group had been “unable to predict the continued decline in electricity forward prices and the €2.1bn in power plant impairments that we had to recognise as a result,” after posting an overall annual group loss.
“Due to these and other exceptional burdens, net income was unusually weak, amounting to −€170m,” Terium added.
RWE has posted a €637m (£493m) annual group loss, compared with a profit of €2.25bn a year earlier.
The group also informed shareholders that it has suspended its dividend for 2015 and warning that results will get even worse before there is an improvement. It also confirmed that 2400 jobs will be axed in its British subsidiary Npower.
The German energy group grew total revenues marginally from €48.47bn to €48.59bn, but income from continuing operations collapsed from €1.69bn to a loss of €1.24bn.
A rise in cost of materials and other operating expenses, as well as a jump in depreciation, amortisation and impairment losses to €5.5bn from €3.1bn the year, also impacted.
The group warned that earnings would slump in the coming year, from €7.02bn in 2015 to €5.2bn-€5.5bn in 2016, while operating results would drop from €3.8bn to €2.8bn-€3.1bn.
“However, we are in the process of radically restructuring the company with the goal of stabilising margins and raising its competitive position to the market average by 2018,” Terium added – although noted that the company’s earnings forecasts showed that “RWE has not yet reached the low point”.
“There are many signs that times will remain ‘interesting’. However these times also bring positive aspects. They give us the opportunity to demonstrate what we are made of. We will prove that we can safely steer your and our company along this difficult course.”
“To do this, we depend not only on our employees’ determination and professional expertise, but also on your backing as shareholders. I would greatly appreciate it if I could count on your patience and trust especially as we go through this difficult period. We will work hard to ensure that it is worth your while.”
“Dividend payments in the years ahead will largely depend on the development of the economic and political environment, especially in conventional electricity generation. However, in this regard, the proverbial silver lining is not visible yet.”
In response to a query from Power Engineering International, RWE spokesperson Sabine Jeschke further elaborated on how the company will respond over the coming year.
“Firstly some political obstacles will be solved over time, although we do not know the final outcome yet. For example concerning the (ongoing) discussion on nuclear provisions. This will become clearer in the course of the year.”
“Secondly we are going to continue to be financially disciplined. In the annual report you will note we have increased our efficiency enhancement programme. And we think that we might make use of growth opportunities via our new daughter bundling renewables, grid and retail business. RWE Group as a major shareholder of the new company will benefit from the growth and the dividends of the new company.”
“Beside npower and conventional generation we are not shedding jobs, and we expect to have stable headcount figures for 2016. Headcounts will always follow operational needs.”