- Operating result down 5%
- No change to Group outlook for 2011 for the time being
- Future political framework conditions must provide for investment capability
- Capital investment on property, plant and equipment remains at record level, at over EUR 7 billion
- By 2013, over EUR 5 billion to be spent on expansion of renewable energy and low-carbon generation
In the first quarter of 2011, RWE Group turnover was EUR 15.8 billion, up 3% on the same period the previous year. As already forecast, there was a decline in the key earnings figures: at EUR 2.8 billion, the operating result was down 5% on 2010 and recurrent net income was down 7% on the previous year, at EUR 1.6 billion. The Trading/Gas Midstream Division closed well below the year earlier level. However, the earnings generated by our UK energy company and our oil and gas production business improved. Despite the negative impact of the German nuclear energy moratorium, RWE is maintaining its outlook for 2011 for the time being.
“The transformation of the energy market mandated by the German government is a Herculean task which will place huge demands on the investment capability of the industry”, said Dr. Juergen Grossmann, CEO of RWE AG. “With our experience and strength, we are willing and able to help accomplish this task. However, to do this the industry needs clear framework conditions as soon as possible.”
Electricity sales stable - gas sales down
Besides the improvement in economic conditions, the significantly milder weather compared to the previous year played a key role in determining energy demand in RWE’s core markets. In the Germany Division, RWE gained new electricity customers both in the area of distributors and industrial corporations, partly due to its successful customer acquisition. In its foreign markets, RWE recorded volume losses due to competition. Overall, the Group’s electricity sales of 81.5 billion kilowatt hours (kWh) were of a similar order to the year earlier level. However, gas sales were down 17% to 129.3 billion kWh as weather conditions have a much greater effect on gas demand.
Earnings down in line with expectations
Although Group revenue was up 3% to EUR 15.8 billion thanks to factors such as higher oil prices, earnings declined as forecast. EBITDA and operating result deteriorated by 4% and 5% respectively, to EUR 3.4 and EUR 2.8 billion. This decrease can be attributed mainly to the Trading/Gas Midstream Division. Disposals of investments were reflected in net income, with capital gains of approximately EUR 300 million, helping to raise net income by 17% to EUR 1.8 billion. Recurrent net income, not including such one-off effects, closed at EUR 1.6 billion, about 7% below the same quarter in the previous year.
High level of investment continues
Expansion and modernisation of generation capacity, both at conventional power stations and at RWE Innogy, continue to provide the focus for RWE’s investment activity. Capital expenditure on property, plant and equipment and financial assets amounted to just under EUR 1.2 billion in the first quarter of 2011, virtually unchanged compared to 2010.
RWE created about 550 new jobs in the first quarter, about 200 of which were in Germany. The increase in Germany is essentially the result of the company taking on employees after completion of their training with RWE.
Outlook for 2011
The Group is maintaining its earnings outlook issued in February for the time being, despite the moratorium on nuclear energy. The company expects a decline of some 20% in operating result and around 30% in recurrent net income, the basis for determining the dividend. The pending political decisions on the future of nuclear energy in Germany will reveal whether RWE will have to face additional burdens on earnings in 2011, and if so, to what extent.
At over EUR 7 billion, this year, capital expenditure on property, plant and equipment will significantly exceed the record level achieved in 2010 (EUR 6.4 billion). By the end of 2013, nearly EUR 4 billion will have been spent on the expansion of renewables, while more than EUR 1 billion are earmarked for the expansion of additional low-carbon generation capacity.
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.