Essen, 14 November 2016, RWE AG

Report on the first three quarters presented: RWE confirms full-year outlook for 2016



  • Earnings trend within expectations

  • Proceeds from IPO and majority stake in innogy give RWE new financial headroom

  • Efficiency-enhancement programme bears fruit

As a result of the successful IPO of innogy SE, RWE AG now encompasses the conventional power generation and energy trading business areas as well as the majority stake in innogy SE, which is fully consolidated in RWE's economic data. In the first three quarters of 2016, the RWE Group posted EBITDA of €3.8 billion. The operating result amounted to €2.1 billion. This corresponds to year-on-year declines of 13% and 20%, respectively. Adjusted net income fell by 58% to €227 million compared to the same period in 2015. On the whole, earnings developed as expected.

"In view of the difficult conditions, above all in conventional electricity generation, we recorded respectable earnings in the first three quarters," declared Markus Krebber, CFO of RWE AG since 15 October.

RWE maintains its full-year forecast for the Group for fiscal 2016. The company continues to anticipate EBITDA of between €5.2 billion and €5.5 billion, an operating result of €2.8 billion to €3.1 billion, and adjusted net income of €500 million to €700 million.

Conventional Power Generation Division
The operating result posted by the Conventional Power Generation Division rose by 7% to €435 million. A major success factor was the ongoing efficiency-enhancement programme. Proceeds on the sale of land in the United Kingdom and the damages settlement for the Hamm hard coal power station completed in early July also had a positive effect on earnings. The fact that electricity generation was sold for lower wholesale prices than in 2015 had a negative effect on earnings, especially for the lignite and nuclear power plants. On the whole, the margins of hard coal and gas-fired power plants were more stable due to a reduction in fuel prices. The company is raising its full-year forecast for Conventional Power Generation due to the better than expected earnings so far this year. This division's operating result is anticipated to be in the order of the level recorded in 2015 (€596 million). Previously, a significant decline had been expected.

Trading/Gas Midstream Division
The operating result recorded by the Trading/Gas Midstream Division deteriorated by €226 million to -€100 million. Energy trading became profitable again in the third quarter, but was unable to offset the losses experienced in the second quarter.

Capital expenditure
At €1.3 billion, the RWE Group's capital expenditure was 29% down on last year's corresponding level. The steepest decline in capital expenditure on property, plant and equipment was recorded by the Conventional Power Generation Division, which had spent substantial amounts of capital on upgrading UK gas-fired power plants in the first three quarters of 2015.

Adjusted net income
The Group's adjusted net income amounted to €227 million. This represents a 58% drop compared to 2015. The main reasons were the expected weaker operating result and the deterioration of the financial result, which benefited from capital gains on the sale of securities last year. By contrast, losses were incurred from sales of securities in the first three quarters of 2016 in anticipation of the impending funding of the nuclear energy fund. Furthermore, in this context, longer-term investments in securities have been converted to short-term liquidity investments, resulting in additional costs due to the current interest environment.

Net debt
As of 30 September 2016, RWE had €27.4 billion in net debt, €2.0 billion more than as of 31 December 2015. The main reason was the significant decrease in market interest rates, which led to an increase in provisions for pensions.

The forecast for net debt is more favourable for the yearend as a whole. Previously, a moderate increase had been anticipated. RWE now expects a level in the order of 2015 (€25.5 billion).
The main reason for this is the substantial income from the IPO of innogy in the fourth quarter. However, regulations resulting from the legal reassignment of responsibility for nuclear waste disposal will probably have a counteracting effect. RWE's net debt, excluding the net debt of innogy, currently totals about €8.7 billion.

innogy SE
The IPO of innogy SE, RWE's renewable, grid and retail subsidiary, marks the passing of a milestone en route to the organisational realignment and financial strengthening of the RWE Group. On 7 October, the innogy share was traded on the Frankfurt Stock Exchange for the first time. With an issue volume of €4.6 billion, it was the largest IPO in Germany since the end of 2000. The sale of treasury stock generated €2.6 billion in proceeds for RWE. innogy SE published its statement on the first three quarters on 11 November 2016.

Additional financial headroom due to proceeds from innogy IPO
The proceeds from the IPO and the majority interest in innogy have given RWE new room for manoeuvre through increased financial flexibility. They have been earmarked for the reorganisation of nuclear waste management envisaged by the government, among other things. In this context, it is envisaged that the energy companies pay a total of €23.6 billion into a public fund. RWE's share amounts to approximately €6.8 billion. It includes a high risk premium of a good 35%, which is a huge financial burden. RWE is in the process of identifying the most economically reasonable option for financing its share. Markus Krebber said, "In view of our very robust liquidity position, this will involve paying as quickly as possible."

Krebber emphasised: "In a very challenging environment, we now have a solid basis on which to shape the future of our company." RWE Generation plays an important role in the conventional energy market. With its flexible power plant fleet, highly efficient processes and qualified workforce, RWE Generation is making a key contribution to security of supply. RWE Supply & Trading is one of the leading energy and commodity traders in Europe and present at many of the world's major trading points. With its activities, it plays a decisive role in ensuring functional trading markets, which are indispensable to our economy.



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