German power giant RWE AG is open to pursuing partnerships with its peers in the utility sector and with large oil companies for developing offshore wind farms in the U.S., following many of its competitors already lined up to develop the first large-scale projects off the East Coast.
RWE is in the middle of an extensive asset swap that will see it take over the entire renewables businesses of rival E.ON SE and subsidiary innogy SE, creating the third-largest renewable energy generator in Europe and the second-largest player in the offshore wind sector.
The company plans to spend several billion dollars on U.S. renewables alone over the coming years. CFO Markus Krebber said this could include building offshore wind farms in partnership with other utilities or oil majors, building on E.ON and innogy's existing offshore portfolios in Europe.
"This is an interesting market in that you have to make relatively high initial investments" to secure expensive leases ahead of state auctions, Krebber told reporters on a call May 15. "So it's very difficult to do it alone in this order of magnitude."
The U.S. is on track to install nearly 14 GW of offshore wind capacity through 2027, according to S&P Global Market Intelligence data, equivalent to more than three-quarters of all the offshore capacity installed to date in Europe. Companies that have plans to build arrays on the East Coast include Royal Dutch Shell PLC with EDP Renováveis SA, Eversource Energy with Ørsted A/S, and Equinor ASA, Iberdrola SA and Electricité de France SA.
The Connecticut House of Representatives passed a bill May 14 that, if signed into law, would mandate the procurement of 2,000 MW of offshore wind energy resources by 2030.
Getting involved in the U.S. market "is definitely part of our strategy," Krebber said, adding that he expects RWE to gain full control of E.ON and innogy's renewables divisions before the end of the year following ongoing regulatory approvals.
"Our focus clearly rests on renewable energy and storage, [and] our future colleagues are already making a major contribution to accomplishing this. They are initiating new projects today that will strengthen the portfolio of RWE Renewables tomorrow," Krebber said.
Trading gains drive up profits
An "outstanding performance" by its trading desks helped lift RWE's net income during the first quarter to €961 million, or €1.56 per share, from €620 million, or €1.01 per share, in the prior-year period.
Adjusted EBIT in the supply and trading unit rose to €252 million, from a loss of €25 million in the first quarter of 2018, on the back of higher earnings from the company's gas and LNG business.
"All desks across all regions were making money in the first quarter," Krebber said of the positive trading result on a separate call with analysts. "We typically run arbitration strategies, and sometimes it takes longer to pay off."
This more than compensated for lower production volumes and €19 million in missing U.K. capacity payments in RWE's European Power business, which includes generation from gas, hard coal, hydroelectric and biomass plants. Results in the company's lignite and nuclear generation business were lower compared to the previous year.