Possible Partnership

Report: RWE Nears Deal With Arab Investor

Terium, RWE DPA
For Peter Terium, promising times ahead?
  • Why it matters

    Why it matters

    RWE needs to change its businesses to cope with a transition to renewable energy in Germany, which has cost it billions of euros.

  • Facts

    Facts

    • RWE is in talks with an Arab investor about investing in projects or forming a joint venture but not about a capital injection.
    • Germany’s second-largest utility is suffering from Germany’s transition to renewable energy.
    • Germany aims to phase out all nuclear energy in the country by 2022 and draw at least 80 percent of energy from renewables by 2050.
  • Audio

    Audio

  • Pdf

Faced with shrinking margins on conventional electricity production and a €25.6-billion debt pile, RWE has engaged in talks with an Arab investor about joint investment options, including forming a joint venture.

German business weekly WirtschaftsWoche reported Thursday that RWE chief executive Peter Terium has been in talks for months with Abu Dhabi state-controlled investment firm Aabar Investments, citing unidentified people familiar with RWE. The negotiations have focused on Aabar either taking a direct stake in RWE or in projects run by the company, the magazine reported.

A spokeswoman for RWE confirmed that talks were underway with an Arab investor, but would not name the partner. She said a capital injection was off the table.

“In the ongoing talks, we are focusing on sounding out the opportunities for the joint realization of projects in the Middle Eastern-North African region,” RWE spokeswoman Sabine Jeschke told Handelsblatt Global Edition.

The talks with the Arab investor could also “lead to a long-term partnership, for instance in the form of a joint-venture,” Ms. Jeschke of RWE said.

The company had in March confirmed it was in talks with an Arab investor about options to cooperate. At the time, the company told Reuters that no outcome could be ruled out.

RWE could soon conclude its negotiations with Aabar Investments, German business weekly WirtschaftsWoche reported.

Speaking to Handelsblatt Global Edition, Ms. Jeschke said a capital injection was off the table: “The topic of an equity participation is no longer something we are pursuing.”

After having lost almost 17 percent in the past five trading days, RWE shares rose on Thursday following the magazine’s report and traded up 9.3 percent €11.85 by 15:23 local time on the Frankfurt Stock Exchange. Shares in E.ON, RWE’s bigger rival, were up 6.6 percent at €8.02.

RWE’s fossil-powered electricity generation business has been battered by Germany’s transition to renewable energy sources, such as solar and wind power. Supported by government subsidies, renewable energy production has expanded the past decade, cutting wholesale electricity in half. RWE has written down billions of euros on gas and coal-fired power plants.

 

144 RWE-WTB 2014 resume updated figure

 

Germany in 2011 announced a program to phase out all nuclear energy in the country by 2022 and draw at least 80 percent of energy from renewables by 2050. The German chancellor, Angela Merkel, made the move after the Fukushima nuclear disaster in Japan.

RWE could soon conclude its negotiations with Aabar Investments, a fund controlled by Abu Dhabi government’s International Petroleum Investment Company, WirtschaftsWoche reported, citing the people familiar with RWE’s operations.

Aabar was an investor in Mercedes maker Daimler between 2009 and 2012, the magazine said.

Following the past week’s slump of RWE’s shares, the utility’s market capitalization had declined to €5.5 billion at closing on Wednesday, making it the lowest-valued stock in Germany’s blue chip DAX index, which comprises 30 firms.

If the low market valuation were to hold for the next year, it could prompt RWE to be booted from the blue-chip DAX in favor of a different company, according to Handelsblatt’s calculations.

Aabar Investments in Abu Dhabi was not immediately available to comment when contacted by Handelsblatt Global Edition.

 

Gilbert Kreijger is an editor at Handelsblatt Global Edition, covering companies and markets. Angela Hennersdorf and Christian Schlesiger are correspondents for Handelsblatt’s sister publication WirtschaftsWoche. Ulf Sommer, an editor with Handelsblatt, contributed reporting to this article. To contact the authors: kreijger@handelsblatt.com, angela.hennersdorf@wiwo.de, christian.schlesiger@wiwo.de

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