Utility shake-up
August 9, 2011
Essen-based utility RWE confirmed on Monday that Peter Terium would replace chief executive Jürgen Grossmann next year as the company repositions itself to cope with the government's decision to close the nation's nuclear power plants by 2022.
Terium, who currently heads the company's Dutch unit Essent, will be made deputy chief executive in September before taking over as CEO on July 1, 2012.
That gives Grossmann less than 11 months to make wide-reaching strategic changes he says are necessary to prepare the company for the post-nuclear business environment.
"The decisions made by the German government have led to substantial financial burdens. However, the German government's energy concept also presents us with opportunities which we would like to make use of," Grossmann in a statement.
Structural shift
RWE announced on Monday that it planned to overhaul its capital structure and revise its investment and divestment plans.
The company aims to raise 2.5 billion euros by issuing new shares and selling treasury stock to cut its debt level and shore up its credit rating.
It also plans reduce the scale of its 20-billion-euro investment program while increasing the value of future divestments from 8 billion to 11 billion euros.
Assets that may be offloaded include long-distance gas network operator NET4GAS, RWE's stake in Berlinwasser, as well as several coal and gas-fired power plants.
Profits suffer
News of the shake-up was accompanied by a profit warning that said this year's earnings would be about 20 percent lower than in 2010 – even worse than the 15 percent decline previously forecast.
RWE said profit for the first half of 2011 plunged by almost 40 percent, mainly due to some 900 million euros in additional expenses linked to the nuclear phase-out and the recently introduced tax on nuclear fuel.
"The curtailment of our earnings has happened just as the largest investment program in the company's history is entering the home straight," Grossmann said.
"We must act now to strengthen our capital base and at the same time secure our leeway for investment in future growth."
A company statement said RWE's most important investment projects were lignite and hard coal facilities in Germany, as well as gas-fired power plants in the Netherlands, UK and Turkey.
Meanwhile, the company's renewables unit continued to focus on wind power in the first half of 2011. RWE Innogy recently invested in specialized ships designed to transport and install offshore turbines in the North Sea and beyond.
Author: Sam Edmonds
Editor: Nathan Witkop