14 May 2020 | 15:17 UTC — London

RWE offsets falling coal, gas generation with as Q1 earnings rise

Highlights

6 TWh rise in renewables offsets 9 TWh drop in coal/gas

2020 demand seen 6% lower in Germany, Great Britain, Benelux

Carbon hedged to 2030; no change to coal-exit strategy

London — RWE offset falling first quarter coal- and gas-fired generation with rising renewable energy output and confirmed its 2020 earnings forecast despite an up-to 6% expected drop in demand, the German power company said Thursday.

Q1 fossil-fueled generation fell 9 TWh year on year to 22.3 TWh, with German lignite and UK gas most affected.

Renewable energy output rose 6 TWh to 9.2 TWh after the integration of E.ON assets, helping group EBITDA to rise 19% on the year to Eur1.3 billion ($1.4 billion).

Noting an expanding renewables portfolio, RWE CFO Markus Krebber said RWE had posted "significant gains across all key earnings figures even in these challenging times."

The company's overall asset base remains dominated by German nuclear/lignite capacity.

Some 90% of planned 2020 output (70-75 TWh) from these sources had been hedged at a profit margin of Eur27/MWh, up Eur3 on 2019, RWE data showed.

The hedged margin for 2021 and 2022, meanwhile, stood at Eur32/MWh (70-75 TWh), before falling back to Eur26/MWh for 2023 with 2023 purely based on lignite production, once the nuclear exit was completed.

Forecast nuclear and lignite production volumes fall in line with closures to 40-45 TWh by 2023 from 70-75 TWh in 2021.

RWE Hedging Position for German Lignite & Nuclear (as of Q1 2020)

Year
Production (TWh)
% hedged
Margin (Eur/MWh)
Av Power (Eur/MWh)
CO2 (Eur/mt)
2019
68*
100
24
29
5
2020
70-75
90 (fully)
27
32
5
2021
70-75
90 (fully)
32
40
8
2022
55-60
90 (implicit)
32
48
16
2023
40-45
90 (implicit)
26
NA
NA

Source: Q1 2020 presentation (*=actual production, av price/CO2 from FY19 report no longer provided in Q1)

RWE's carbon position was fully financially hedged through to 2030, with Krebber noting no fundamental change to its strategy either due to the coronavirus or the lignite phase-out agreement.

The company planned to invest Eur5 billion by 2022 (85% of all net investment) in expanding its renewables portfolio to 13 GW from 9 GW.

Construction of the 850-MW Triton Knoll offshore wind farm in the UK began in January, while a final investment decision on the German North Sea Kaskasi project was reached in April.

Both projects are scheduled to start producing electricity in 2022.

RWE GENERATION Q1 (TWH)

2020
2019
Lignite
8.6
13.5
Coal
2
5.4
of which Germany
0.8
2
NL (incl biomass)
1.2
3
Gas
11.7
12.6
of which Germany
1.9
1.7
NL
1
0.2
GB
6.1
9.2
Nuclear
5.6
5.9
RES
9.2
3.4
Total
37.5
41.4

Source: RWE