Germany’s second-largest utility RWE won’t pay a dividend for the second year in a row. And while its municipal shareholders, who control some 24 percent of the company, initially put up a fight, they have now conceded, Handelsblatt has learned.
“Management’s suggestion to suspend the dividend payment for ordinary shareholders yet again has been accepted by the supervisory board – and in fact unanimously,” the head of the company’s control committee, Werner Brandt, told Handelsblatt in an interview.
“The representatives of the municipal shareholders also agreed,” Mr. Brandt said.
“This decision is inevitable in my opinion.”
Influential municipal shareholders had threatened to sell their shares if the utility refuses to pay out a dividend for the 2016 financial year. RWE already last year decided to scrap dividends – the first time since the 1950s. Already strapped municipal shareholders lost some €150 million ($156 million) as a result.
Two weeks ago, the utility announced it wouldn’t pay a dividend to its shareholders this year either, drawing the ire from mayors and municipalities along the Rhine region.
But Mr. Brandt of the control committee defended the controversial decision.
“This decision is inevitable in my opinion,” he said. “In light of the dire financial situation and the high exceptional charges there was no leeway for a 2016 dividend.”
Germany’s second-largest power provider is struggling amid the mandatory switch to renewables in the country’s energy transition. Subsidies for green energy have led to a fall in the wholesale price of electricity and the company, like its peers, is regrouping to cope with the changed power landscape. It has split into a renewable-energy producer, Innogy, and a fossil-fuel power generator.
Mr. Brandt said management will slim down as a result of the transition. Starting in May, Chief Executive Rolf Martin Schmitz will take over the labor director functions of Uwe Tigges, the current chief human resources officer. Mr. Tigges will move to Innogy.
RWE’s executive board will then only consist of two members: CEO Mr. Schmitz and Finance Chief Markus Krebber. “For a DAX company, this represents a very lean set-up,” Mr. Brandt said.
Jürgen Flauger handles Handelsblatt’s coverage of energy from all angles: electricity and gas providers, international market developments and energy policy. To contact the author: firstname.lastname@example.org