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RWE released a strong set of results, ahead of expectations, pushed one more time by the Supply & Trading segment. The group is managing its operations well amidst a difficult environment, thus providing reassuring signals. The only cloud was a €850m write-off related to a Russian hard coal contract. Threats of windfall taxes in Germany seem low risk for now.
Companies: RWE AG
RWE confirmed its FY21 solid results unveiled in mid-February, as well as its guidance for 2022 even if it does not reflect the war in Ukraine yet.
More importantly, the group provided visibility on its (relatively low) exposure to Russia and the flexibility of its thermal fleet. Even if liquidity is not a problem yet, this is particularly due to coal plants that should become the group’s new cash cow in 2022.
In short: long RWE, but be careful of regulations…
What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.
Mixed half-year figures for the German utility: despite beating analysts’ estimates, RWE’s adjusted EBITDA was down to €1.75bn, declining 4.5% year on year. The drop in EBITDA was mainly due to adverse wind conditions in Europe and to an unprecedented cold snap in Texas during February 2021. However, the company was able to upgrade its FY21 outlook, on the back of an outstanding performance of the Supply & Trading division in H1 21, in which EBITDA jumped +63%.
A difficult but expected quarter for the German utility. Adjusted EBITDA was driven down by 33% mainly due to the sharp impact from the Texas cold snap (€-400m) and adverse wind conditions in Europe.
The earnings forecast and dividend policy are, however, confirmed and seem realistic for the full year, despite non-recurring items. The promising outlook for the following years remain constrained by the high exposure to thermal assets. But we’re betting on an accelerated green transition.
RWE published solid full-year results for 2020 that even exceeded the latest guidance given by the group. However, apart from the increase in the dividend, the FY21 guidance is disappointing as EBITDA and net income fall well below the consensus, mainly driven by extra costs due to the cold snap in Texas. In all, we reiterate our negative view on stock.
Good operating results over the first nine months of the year, but mainly backed by the first quarter. The group has confirmed its FY20 guidance and is now targeting the upper end of it. Looking ahead, with 85% of the ytd investments devoted to green activities, the group is well on track to achieve its objectives. In addition, the balance sheet is strong enough to accelerate investments – the group is said to be open to further external growth.
RWE has successfully concluded its capital raising of c.10% of its market cap at a price of €32.55/share, or a 4.9% discount versus the last closing price (18/08/2020). The proceeds will be used to give some flexibility in expanding its renewables activities – as a reminder, the group is targeting a 1GW portfolio (wind + solar) by 2022, implying a capex need of at least €5bn. Operating guidance and dividend policy are unchanged and confirmed.
Adjusted EBITDA increased by 18%, to €1.8bn, but mainly thanks to good weather for offshore wind in Q1 20. Mechanically, EBIT increased by a third, to €1.1bn. In all, it is a good publication, but it only confirms Q1 20, without much new news. Even if the group is well on track to achieve its FY20 and long-term targets, we consider the share to be overvalued.
Good operating figures for its Q1, with EBITDA at €1.3bn, mainly driven by favourable wind conditions. However, this was reduced by losses in the financial asset portfolio and the negative mark-to-market for FX derivatives, consequently net income amounted to €0.6bn. The full-year guidance and the dividend target are confirmed. We will update our model, currently conservative, to adopt a more neutral view.
Having revised its EBITDA and net income guidance upwards, the group was able to reach the top of both. EBITDA came in at €2.1bn and net income was €1.2bn. Growth was driven by the same elements as in the first nine months: one-offs and M&A, which remain in the background given that most of the group’s valuation is based on renewables. The €2.7-3.0bn EBITDA target for FY20 is below our expectations. We confirm our negative view of the stock.
The German government has provided more details on the timing and level of compensation for the accelerated lignite phase-out: the RWE installed capacity of lignite is expected to decrease from 8,720MW at the end of 2019, to 5,900MW in 2022, 3,800MW in 2029 and 0MW in 2038. The compensation over 15 years will be €2.6bn, while the group estimates the overall financial impact to be around €3.5bn.
After the solid Q3, driven by the acquired operations and the good trading performance, and considering the EU green light for the reinstatement of the UK’s capacity market, the group revised upwards its EBITDA guidance, from €1.4-1.7bn to €1.8-2.1bn and its net income one from €0.5-0.8bn to €0.9-1.2bn. On the negative side, pro forma figures for the renewables division are below expectations.
A fairly good set of H1 figures, but much of it comes from the already announced good performance in trading activities. The group tried to be reassuring about the asset swap by affirming that everything is on track. We will slightly increase our target price to reflect the increase in achieved price in FY20, but we will, however, remain on the negative side as most of the positives are already integrated in our target price.
RWE reported a good set of results. The good performance in Trading offset the decline in the European Power segment due to lower volumes and the suspension of the UK capacity market, whereas the Lignite & Nuclear segment remained flat as lower volumes were compensated by higher electricity prices. In all, full-year guidance is confirmed with a dividend target of €0.8.
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Dish of the day
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