The business of Germany’s largest electricity producer, RWE, is doing better this year than expected. The energy company has surprisingly corrected its profit forecast for the current year by a good 350 million euros. However, this is less due to coal-fired power plants or wind turbines, but more to trading activities.
So-called RWE traders trade electricity or gas around the world, but also commodities or with CO₂ emission rights. You buy and sell energy, for example, to large industrial companies or to Deutsche Bahn. Their open plan offices – in Essen and London, for example – are called “trading rooms”, and you can think of them as a small stock exchange.
In the first half of the year alone, the business division made a profit of 525 million euros before interest, taxes, depreciation and amortization, RWE reported. Originally, the group had promised a maximum of 350 million euros for this case. Traders obviously have a race: the division had already made a surprising amount of money last year. But at the time, hardly anyone believed that this success could be simply repeated or surpassed. Stock analysts point out that the prices of several commodities have recently increased; The energy sector could also benefit.
In the first half of the year, RWE produced more conventional electricity than in the weak period of the previous year
However, the good result in retail does not change the fact that RWE is fundamentally going through a complex change. The Essen-based group is still one of the biggest emitters of greenhouse gases in Europe. It operates large lignite, nuclear and gas-fired power stations which produced more electricity in the first half of 2021 than in the same period of the previous year; However, demand was particularly weak at the time, as several branches of the industry stood idle for weeks due to the corona pandemic. Of course, RWE’s coal and nuclear power plants will be phased out over the next few months and years, as agreed with the state. Their income is therefore gradually disappearing.
On the other hand, the group swapped a large part of its activity with its competitor Eon two years ago: RWE gave up activity with the networks and private customers of its subsidiary Innogy. In return, RWE took over all wind and solar farms from Innogy and Eon. Since then, the Essen-based company has been the world’s second-largest operator of offshore wind turbines. “We invest heavily – and almost exclusively in green energy,” said CEO Markus Krebber.
Open detailed view
Markus Krebber has been CEO of Germany’s largest electricity producer RWE since spring.
(Photo: Wolfgang Rattay / Reuters)
Of course, expanding into new markets also comes with risks. RWE felt it earlier this year when a cold snap in Texas not only froze solar and wind systems: gas lines also froze, and coal and nuclear power plants temporarily failed. As a result, the price of electricity in the US state had increased dramatically. But RWE had already sold some of its own wind power in advance and therefore had to purchase electricity at moon prices from time to time in order to meet its obligations. This episode alone cost the company around 400 million euros this year.
Against this background, it is “gratifying” that RWE is able to raise its forecasts again, says CFO Michael Müller. This gives the group “new momentum” for change. On Friday, RWE temporarily gained 2% in market value, making it one of the biggest daily winners of Germany’s biggest stock index, the Dax.