RWE confirms forecast for 2017 after good performance in the first six months
Adjusted EBITDA up 7% and adjusted net income rises 35% compared to same prior-year period
Forecast confirmed in the upper end of the range
Net debt of the RWE Group declines by €1.2 billion
RWE is on track. According to our current planning, we should finish the fiscal year towards the upper end of our forecast ranges. The key indicators also demonstrate that our financial situation provides us with a solid foundation for the future. And we made the right decisions in defining our strategy.
RWE is satisfied with its performance in the first six months of fiscal 2017. From January to June, the Group posted adjusted EBITDA (adjusted earnings before interest, taxes and depreciation and amortisation) of €3.2 billion, compared to €3.0 billion in the same period last year. All of the segments made positive contributions to earnings.
Net income amounted to €2.7 billion, up from €457 million in the first half of 2016. Along with the good business performance, this improvement was driven by a significantly better financial result and the nuclear fuel tax refund. In early June, the German Constitutional Court ruled that the law on the nuclear fuel tax was unconstitutional and retroactively void.
Adjusted net income – which does not include the nuclear fuel tax refund – totalled €809 million. This represents an improvement of 35%. For 2017 as a whole, RWE continues to expect adjusted EBITDA of between €5.4 billion and €5.7 billion, and adjusted net income of between €1.0 billion and €1.3 billion. According to current planning, the company expects to close the year underway at the upper end of these forecast ranges.
“We used the first half of this year to further develop our company, in line with our strategy,” explained Rolf Martin Schmitz, Chief Executive Officer of RWE AG. “These efforts include forward-looking projects intended to successfully position the company to achieve our main aim of ensuring security of supply.” For instance, RWE has taken initial planning steps at the Tilbury power station site in the UK, with an eye to creating options for the construction of gas-fired power plants and a battery storage facility. In the Netherlands, the company is retrofitting power stations for the use of biomass. This state-subsidised area of business offers long-term security for both investments and returns. Another innovative solution is the marketing of decentralised generation capacities from emergency generators by Supply & Trading.
In parallel, optimisation of the power plant portfolio ensures a very high degree of efficiency in power generation and flexibility of the power stations. This flexibility is crucially important to be able to offer security of supply, because with a close relationship between trading and power stations, the required generation capacities can be provided exactly when they are needed, when the highest revenues can be generated, either on the market or for grid services.
Lignite & Nuclear Division: decline in earnings anticipated
During the first half of 2017, adjusted EBITDA of the Lignite & Nuclear Segment fell to €401 million. The main reason for this was lower wholesale prices of electricity compared to the previous year. For 2017 as a whole, RWE continues to anticipate that the division’s earnings will be much lower than in the previous year.
European Power Division: better than planned in operating terms
Adjusted EBITDA in the European Power Segment totalled €222 million, compared to €316 million in the first six months of last year. The decline of almost €100 million was due exclusively to the lack of special items, which amounted to roughly €132 million last year. In operating terms, earnings actually improved year on year. The division is performing better than planned. The margins and dispatch of gas-fired power stations are higher than expected. Hard coal-fired power stations remain under pressure. However, RWE is countering this by pressing ahead with efficiency enhancement measures. The commercial optimisation of power plant dispatch also made a strong contribution to the division’s earnings. RWE now anticipates a significantly improved result from this segment in 2017, in particular as one-off revenue from the sale of a power station site in the United Kingdom will also be recognised in the second half of the year. A decline in this division’s earnings was originally forecast.
Supply & Trading Division: back to positive performance
Adjusted EBITDA in the Supply & Trading Segment amounted to €131 million, whereas earnings in the first half of 2016 had been in negative territory. Consequently, business performance in this segment is now back in line with expectations. Averaged over the medium term, Supply & Trading is expected to have sustained earnings potential in the order of roughly €200 million annually.
innogy: moderate increase
The financial investment innogy boosted its adjusted EBITDA by 2%. For 2017 as a whole, innogy expects to close moderately above last year. Details on innogy’s earnings were released on 11 August in the company’s half-year report.
Net debt expected to decline
As of 30 June 2017, the net debt of the RWE Group amounted to €21.5 billion, down €1.2 billion on the figure recorded at the end of 2016. This was mainly due to the nuclear fuel tax refund and lower pension obligations. Consequently, RWE now projects that as of end-2017, net debt will be lower than last year’s figure of €22.7 billion.
‘RWE stand alone’ indicators underline positive development
In addition to the fully consolidated financial reporting, in 2017 RWE also started publishing additional indicators for ‘RWE stand alone’, which cover the core business areas Lignite & Nuclear, European Power and Supply & Trading, along with the innogy dividend. This approach provides transparency as to how the company generates free cash flow, which forms the basis for the dividend. For ‘RWE stand alone’, adjusted EBITDA amounted to €1.4 billion and adjusted net income stood at €883 million. These figures already include innogy’s dividend payment for 2016. As of 30 June 2017, net debt directly attributable to RWE totalled €4.3 billion. Compared to the end of 2016, this represents a decline of €2.6 billion.
The good business performance makes us optimistic about the future. We still expect to propose to next year’s Annual General Meeting the payment of an ordinary dividend of €0.50 per share for fiscal 2017. Above and beyond this, we are planning on paying a special dividend of €1 per share in relation to the nuclear fuel tax refund.
More information on the business results can be found here:
Interim Report on the First Half of 2017
Key figures for the first half of 2017
Speech at the Balance Sheet Press Conference
Chart presentation for the investor and analyst conference call
Video interview with Markus Krebber, Chief Financial Officer of RWE AG