Energy Transition

Power Outage

RWE, EON CEOs DPA
Hard times for the chief executives, E.ON's Johannes Teyssen and RWE’s Peter Terium.
  • Why it matters

    Why it matters

    If Germany’s biggest utilities E.ON and RWE fail to adjust to the country’s shift to renewable energy, their profits and share price could continue to suffer.

  • Facts

    Facts

    • RWE booked a loss of €30 million ($37 million) in the third quarter, E.ON had a loss of €774 million ($965 million).
    • E.ON shareholders may face a dividend cut due to expected decline in full year 2014 profit.
    • RWE shares fell 2.5 percent by noon on Thursday. E.ON shares have dropped 3 percent since reporting results.
  • Audio

    Audio

  • Pdf

E.ON and RWE, Germany’s top two energy companies, confirmed within 24 hours this week the existential struggle consuming the industry amid a national shift to alternative fuel sources.

On Thursday, RWE, the nation’s No. 2 utility, said that net profit excluding special items in the first nine months plunged by 60 percent from a year ago. A day earlier, E.ON said its net profit fell by 91 percent. Both companies reported losses for the third quarter.

The losses and drops in profit came as the utilities were forced to write down investments on new or nearly brand new nuclear and conventional power plants that have been rendered economically unsustainable in the new economic environment created by Germany’s shift to renewables.

Massive German spending on wind and solar power in the wake of Japan’s Fukushima nuclear disaster, which led to Germany’s decision to exit nuclear power, has created a glut of electricity on the German market and caused the wholesale price of electricity to fall by half.

That has taken a devastating toll on the bottom lines of RWE and E.ON, which have struggled to retrench, slim down and decommission production capacity while at the same time exploring legal avenues to possibly win damages from the German government for its sudden policy change.

 

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