Dusseldorf The Essen-based energy company RWE plans to invest 50 billion euros in its new core business over the next few years. An average of five billion euros is to be invested annually, primarily in wind, solar, storage and hydrogen. The rest should go into the gas business and energy trading.
“Our extensive strategic realignment has been successfully completed,” said CEO Markus Krebber on Monday at the presentation of the Group’s new strategy. RWE will “change dramatically”, he announced.
RWE intends to expand its green capacities from currently 25 to 50 gigawatts by 2030. For comparison: That is almost as much as the capacities of onshore wind power currently in all of Germany. And this is also the focus of RWE’s new direction. The company has already filled almost half of the planned expansion with projects for wind farms over the next few years. In the offshore sector in particular, RWE recently achieved a lot in Great Britain. By 2030, capacities for offshore wind power alone are expected to triple. According to their own statement, the people of Essen are already number two here in the world.
The change from the dirtiest company in Europe to one of the largest renewable energy groups on the continent is above all an economic necessity: RWE expects profit increases of up to nine percent per year as a result of the green investment offensive. By 2030, the profit from the core business is expected to double to up to five billion euros compared to the current financial year.
Top jobs of the day
Find the best jobs now and
be notified by email.
It has been almost exactly three years since thousands of activists, citizens and demonstrators went to the barricades in front of a small forest near Cologne for weeks against the largest CO2 emitter in Europe. The Hambach Forest has remained. Nevertheless, a lot has changed since then.
The coal phase-out is a done deal, probably as early as 2030. Long-time RWE boss Rolf Martin Schmitz retired at the end of April, and with him the old, dusty image of the Essen-based energy company. The new RWE, as CEO Krebber likes to say, is younger, more modern and, above all, greener.
Green conversion does not come voluntarily
Germany’s largest electricity producer is facing the most important change in its history: from a dirty coal company to a green global player. A turnaround that is anything but voluntary. The exit from coal is politically wanted, the price of CO2 will make fossil fuels a loss business after 2030, and the climate targets from Berlin and Brussels leave little room for alternatives.
In fact, RWE is only just beginning its conversion. Last year, the Essen-based company produced 147 terawatt hours of electricity – one fifth of which came from the renewable sources of water, wind, sun and biomass. In the first nine months of the year, the company even produced almost 40 percent more electricity from coal than a year earlier. Earnings before interest, taxes, depreciation and amortization (Ebitda) in the coal / nuclear energy division climbed 75 percent to 549 million euros.
Over 30 percent of the electricity is currently still generated with lignite and hard coal, 14 percent with nuclear energy. But this business also has an expiry date: The nuclear phase-out in Germany was decided in 2011, and RWE’s last nuclear power plant will have to be taken off the grid at the end of 2022. Krebber rejects debates about extending the term recently initiated by managers such as Linde boss Sanjiv Lamba or ex-BASF boss Jürgen Hambrecht and Volkswagen board member Herbert Diess.
Most recently, the criticism of the decision at that time had grown again. Proponents of nuclear power argue with security of supply and high electricity prices – after all, it is unclear how Germany can cope with the increasing demand for electricity and the simultaneous withdrawal from coal-fired power generation. But you also argue with climate protection, after all, power plants that generate almost CO2-free electricity would be taken off the grid.
There is still a long way to go before we can achieve climate neutrality
In any case, RWE’s classic business model no longer has a future. Now the green power generation should become the core business. RWE succeeded in doing this primarily through the swap deal with competitor Eon at the beginning of 2018. While Eon took over the grid and sales divisions from RWE subsidiary Innogy, RWE received the renewable energies from Innogy and from Eon in return. Since autumn 2019, when the deal was sealed, RWE has officially been one of the largest producers of renewables in Europe.
Wind, solar and storage should represent the new core business. RWE even wants to become climate neutral by 2040. But there is still a long way to go before then. CO2 emissions have been falling for years, by 19.2 million tons last year alone. But they are still extremely high at 68.9 million tons.
To change that, 2.5 gigawatts of wind, solar and storage are now to be added to the portfolio per year. So far, only an expansion of 1.5 GW per year was planned. That would be an increase of a good 70 percent. This also includes two gigawatts of electrolysis capacity for green hydrogen over the next eight years. “We are in an excellent position to become one of the leading hydrogen players worldwide,” said Krebber confidently on Monday.
RWE’s gas-fired power plants in particular played an important role in this. With the prospect of being converted to green hydrogen at some point, the RWE boss is not ruling out the construction of new gas-fired power plants. RWE currently owns the second largest gas-fired power plant fleet in Europe with around 14 gigawatts of installed capacity. Further systems with a total of at least two gigawatts of capacity are to be added by 2030.
“Our new strategy not only paints a clear picture of how our company will develop up to 2030. It also shows that we have the financial tools to do this and are financing our green growth in a green way, ”promised CFO Michael Müller on Monday. 90 percent of all investments should go into green projects.
RWE has already increased its forecast for 2022 due to good results. If the group had previously announced an adjusted Ebitda of 3.1 to 3.4 billion euros, it should now be 3.3 to 3.6 billion euros. Shareholder representatives welcomed the announcements. “I think we’re heading in the right direction,” said the managing director of the German Association for Protection of Securities Holdings (DSW), Thomas Hechtfischer. RWE will go green even faster than previously planned. Against the background of the World Climate Conference in Glasgow, this is “the right signal”.
The shareholders should also benefit: for this year the dividend will rise to 90 cents per share. In the future, this should become the lower limit for the annual profit distribution. The share of the energy company gained 1.5 percent on Monday.
More: Why the high energy costs in Spain are a warning for Europe