- Recurrent net income up by 3%
- Grid regulation and emissions trading impose constraints
- First-quarter operating result 9% down year on year
Regulatory measures placed greater pressure on RWE Group earnings in the first quarter of 2008 than in the previous year. Also, as expected, the trading business did not reach the extraordinarily good level of the previous year. The operating result thus decreased during the first quarter. RWE nevertheless intends to offset the first-quarter constraints in full in the coming quarters. Therefore, the overall outlook for the fiscal year can be confirmed.
Organic revenue up by 6%
In the first quarter of 2008, the RWE Group generated external revenue of Euro 13.4 billion. Adjusted for consolidation and currency effects, this constitutes an increase of 6% compared to the previous year. Exchange rate effects had a dampening influence, as Sterling lost value against the euro.
Operating result 9% under previous year
The German Federal Network Agency’s additional cuts in grid fees and more stringent emissions trading rules went into effect in early January. Additionally, RWE’s trading activities remained far below the extraordinarily high level reached in the comparable period last year. The result was an 8% decline in EBITDA for the RWE Group in the first three months of 2008 to just under Euro 2.9 billion. The operating result decreased by 9% to Euro 2.5 billion.
Increase in recurrent net income by 3%
In the first quarter of 2008, recurrent net income, i.e. net income adjusted to exclude one-off effects, rose by 3% to Euro 1.4 billion. Net income declined significantly in the first quarter to Euro 809 million, due to the impairment loss recognised for American Water.
Capital expenditure in the energy business up by 18%
Capital expenditure on property, plant and equipment totalled Euro 657 million in the first quarter of 2008. Net of American Water, this constitutes an 18% increase in investments in the Group’s core energy business.
Around half of this capital expenditure is attributable to RWE Power. The most significant single project is the construction of the new lignite-fired power plant in Neurath. In addition, RWE Power is currently building a new combined-cycle gas turbine plant in Lingen, and construction of a twin-unit hard-coal power plant in Hamm began in March. RWE Energy devoted the majority of its investment budget to the maintenance and improvement of its electricity and gas networks. RWE Dea stepped up exploration of further gas prospects in North Africa during the first quarter, while RWE npower made substantial investments in the United Kingdom. Its largest project is currently the construction of the new gas-fired power plant at Staythorpe.
Cash flow up year on year
In the first quarter of 2008, RWE generated Euro 1.4 billion in cash flow from operating activities. Compared to the previous year, when American Water was still included in the figure, this constitutes an increase of Euro 476 million, or 52%. Free cash flow – i.e. cash flow from operating activities minus capital expenditure on property, plant and equipment – increased by Euro 480 million to Euro 727 million, due to the rise of cash flow from operating activities.
Workforce increases by almost 2%
As of 31 March 2008, the RWE Group employed 64,517 people, 60% of whom worked in Germany. Compared with 31 December 2007, the number of employees thus rose by 1,078, or 1.7%. As part of their investments in new power plants, RWE Power in particular took on new staff, while RWE npower saw growth in sales and customer service.
Outlook for 2008
The external revenue of the RWE Group is expected to be higher in 2008 than last year. RWE still anticipates at least matching EBITDA and the operating result reported for 2007. Recurrent net income is forecast to rise by more than 10%. The Group is thus confirming the outlook for 2008 announced in February of this year – with the exception of net income. Net income is predicted to be slightly below last year’s level, due to the one-off effect of American Water.
Capital expenditure on property, plant and equipment will be increased substantially, with total expenditure in the order of Euro 6 billion planned. The Group is also planning to significantly increase expenditure on research and development. Over Euro 100 million per annum has been budgeted for 2008 and subsequent years – and the trend is rising. More than two thirds of the research budget will be dedicated to power generation projects designed to increase efficiency and reduce emissions.
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that we have made based on information available to us at the time this document was prepared. In the event that the underlying assumptions do not materialise or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, we cannot assume responsibility for the accuracy of these statements.