Fraud Allegations

Power Play

RWE-picture alliance
RWE is investigating whether the German utility was overbilled for work at two power plants.
  • Why it matters

    Why it matters

    If RWE is shown to be the victim of fraud, it could undermine the utility’s share price, which has fallen dramatically during Germany’s transition to alternative energy production.

  • Facts


    • RWE said it is investigating possible fraud involving a Dutch contractor, Imtech.
    • RWE and Imtech both say their own probes have so far not uncovered evidence of fraud.
    • Shares of Imtech plunged by more than 40 percent.
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RWE, Germany’s biggest electricity utility, said it was investigating the possibility that false billing by a Dutch contractor and its suppliers could have cost the German company millions of euros.

The utility, based in Essen, said it is investigating whether bills for construction at two RWE power plants in Germany may have been falsified.

The work in question involves an RWE construction contractor, Dutch services provider Imtech, which operates a German subsidiary from Hamburg.

Imtech, in a statement, said its internal review of the allegations had so far turned up no evidence of fraud. RWE, in a statement, has said it is concerned by the allegations, but has otherwise declined to comment further.

Allegations of false billing by some Imtech rivals were first raised by a whistleblower at the Dutch company, who provided examples to Handelsblatt and a Dutch newspaper, De Telegraaf, of what were described as false or inflated bills for construction work.

The accusations focus on allegedly overpriced bids awarded to Imtech from 2008 to 2010 for work at two new RWE power plants in the northwest German cities of Hamm and Eemshaven.

Imtech allegedly won the lucrative, overpriced contracts because competitors, allegedly in collusion with Imtech managers, did not bid on the projects or submitted higher bids, guaranteeing the jobs would be awarded to Imtech, research done by Handelsblatt and De Telegraaf suggests.

The newpapers possess documents that suggest Imtech derived a profit margin on the projects of 30 percent. According to industry experts, the going rate for such work is usually 20 percent at most. The order volume at each power plant was initially estimated to be €31 million.

But volumes rose during construction to €41 million in Hamm and €55 million in Eemshaven, respectively, according to the documents.

When presented with the newspaper’s research, RWE said: “If there was an antitrust agreement to our disadvantage, we will pursue it.”

Imtech said that a whistleblower, whom it didn’t name, had initiated an internal examination that is being carried out by its compliance department. That probe has not uncovered wrongdoing, it said.

“So far, the investigation has shown no anti-competitive practices,” Imtech said in a statement. “The investigation, however, continues.”

The probes come at a bad time for RWE, which is fighting mounting losses in the wake of Germany’s decision to subsidize wind and solar energy.

The German chancellor, Angela Merkel, set in motion the country’s energy “transition” to alternative sources after the nuclear catastrophe in Fukushima, Japan, three years ago.

Under the plan, Germany plans to phase out nuclear power by 2022 – a decision that will force RWE to close 17 nuclear power plants, some of them almost brand new, and lose a main source of income. Since then, RWE has moved ahead with plans to lay off 13,000 people by 2016.

RWE produces more than 40 percent of its electricity from coal power plants and is a major producer of carbon dioxide pollution, earning it the ire of Germany’s environmentally sensitive public.


RWE Net income-01
Net profit (billions of euros) has plunged at RWE amid Germany’s alternative energy push. Source: RWE


Imtech has been the focus of previous fraud investigations, which have led to the dismissal of several managers. German prosecutors in Hamburg have been looking into the newest allegations at Imtech for the last few weeks.

The probe could affect Commerzbank, Germany’s second-largest bank, which was part of a consortium that organized an unsuccessful sale of Imtech stock in a capital increase last month.

About half of the new shares Imtech wanted to sell were not sold and remain on the consortium’s books. Commerzbank still held €70.8 million worth of Imtech shares after the sale. Imtech’s share price plunged after the company addressed the allegations brought by Handelsblatt and De Telegraaf.

Commerzbank’s stake in Imtech plummeted to €46 million yesterday.

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