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Talking About a Revolution

Terium-DPA
Revolution, he wrote: Peter Terium is calling for restructuring at energy firm RWE.
  • Why it matters

    Why it matters

    RWE’s chief executive Peter Terium is launching an attempt to save the company by reinventing it as a decentralized service provider.

  • Facts

    Facts

    • Peter Terium, RWE’s chief executive, has written to staff calling for a revolution in the company.
    • RWE, Eon and other energy firms in Germany have been hit hard by Germany’s decision to move to renewable energy.
    • The energy companies are clashing with the German government over new taxes and regulations.
  • Audio

    Audio

  • Pdf

It has been an electrifying few days for the top thousand managers at energy firm RWE, the second largest provider in Germany.

On Tuesday, Peter Terium, RWE’s chief executive, told his 1,700 managers that the firm needs a new business model and a new license to operate.

“We have to reinvent ourselves. No part of our business is safe,” Mr. Terium wrote in a letter to senior staff. “This is a revolution that requires us to take revolutionary measures.”

The letter, seen by Handelsblatt, addressed managers who gathered from all over the world for a two-day workshop shaping the future strategy.

“Our business model so far has been to produce energy with large power stations,” Mr. Terium wrote. This model is no longer valid.

In the future, RWE should move from being a producer and become a service provider. “We need to adapt our business model to a future which is decentralized, digital and green,” he said.

Mr. Terium announced changes to all parts of RWE’s business. The company will retain its power stations but in the future, this department is to become smaller and more efficient.

In its renewable energy business, Mr. Terium called for “less mass, more class.” RWE will focus more on the role of operator rather than investing billions of euros in new technologies, and will work together with additional investors.

“The situation is serious and unless we act as well as talk about the problems, we will destroy our company’s future.”

Peter Terium, chief executive, RWE

The commercial area will remain the economic hub and is to acquire new business through new products – ideally globally.

The sales department is to get closer to customers and create innovative business models and products. The grid is to provide stable returns.

The call comes in the context of losses amid the move to renewable energy sources in Germany. RWE is in crisis; its core business, big power stations producing electricity, is under threat and last year, RWE registered its first net loss.

This is due to the energy transition, Germany’s switch to renewable energy sources. The transition is causing major difficulties for all energy companies.

“Our business faces groundbreaking changes with dimensions similar to the industrial revolution,” Mr. Terum wrote. “The situation is serious and unless we act as well as talk about the problems, we will destroy our firm’s future.” He emphasized the need for the firm to reinvent itself as a service provider, which meant “moving from being an integrated provider to a decentralized, flexible and modern energy manager.”

For management, he said, this requires a change of culture, moving away from the excesses of perfectionism, compartmentalization and hierarchical thinking.

 

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RWE’s managers were less than galvanized by what they heard. “Everyone knows that the situation is serious,” said one. “RWE urgently needs a concrete business model to make profits again.”

RWE is already taking some action. On Thursday, the company announced the sale of its headquarters building, a tower in Germany’s industrial Ruhr area, to real estate investment funds ARC Global Trust from the United States. RWE will keep working in the building and has signed a long-term agreement to rent the property back.

Nonetheless, energy firms in Germany face real difficulties. Both RWE and another energy firm, Eon, have formally complained about  the German government’s requirement that they stop operating nuclear reactors. They are also opposing taxes on fuel elements.

Eon is also fighting new requirements that nuclear waste be disposed of near to where it is generated rather than at a nuclear waste dump near a city in northern Germany it has used until now. RWE has said it will take legal action against these proposals.

 

 Jürgen Flauger reports on the energy sector for Handelsblatt. To contact the author: flauger@handelsblatt.com

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