RWE Expands Plant Shutdowns as Europe Steers Away from Coal, Nuclear

Researched by Industrial Info Resources (Sugar Land, Texas)--RWE AG (FWB:RWE) (Essen, Germany), the second-largest electricity producer in Germany and a major European utility, continued to be pummeled by Europe's move toward subsidized renewable energy, particularly in Germany, low coal prices, and milder-than-expected weather in the second quarter of 2014. Net income attributable to RWE's shareholders was reported to be 29 million euros ($38.81 million), compared with a 388 million-euro ($519.27 million) loss in second-quarter 2013.

Industrial Info is tracking more than $44 billion in active projects involving RWE, including the $3.13 billion construction of a 1,600-megawatt (MW) coal and biomass-fired power station in Eemshaven, Netherlands. The project involves the construction and installation of two Alstom ultra-supercritical boilers, with a flue-gas desulfurization system, to power two Siemens AG (NYSE:SI) 800-MW steam turbine generator sets. Alstom Power Netherlands BV (Rijswijk, Netherlands) is performing design-engineering services.

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Industrial Info also is tracking RWE's $2.66 billion construction of a 576-MW offshore windfarm near Rhyl, Wales, where installation was recently completed on all 160 Siemens 3.6-MW turbines. RWE expects the windfarm to be operational by winter. It will be the second-largest operating windfarm in the world.

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Total revenues stood at 10.4 billion euros ($13.91 billion), a 10.7% decrease from second-quarter 2013. Wholesale prices for electricity in RWE's served areas have fallen almost 50% in the past three years, and RWE has been moving aggressively to reduce capacity: in 2013, the company laid out plans to cut about 9,000 MW in Germany and the Netherlands over several years. By the end of March 2015, it will have reduced generating capacity by about 5,000 MW in the U.K. alone, although largely due to environmental regulations

In March, RWE sold its Dea oil and gas unit, which consisted of assets in the U.K., Germany and the North Sea, to L1 Energy (Moscow, Russia) for 5.1 billion euros ($7.1 billion). Capital expenditures reached 1.49 billion euros ($2 billion) during the first half of the year, compared with 1.54 billion euros ($2.06 billion) in the same period in 2013.

"The expansion of renewable energy and the significant decline in wholesale electricity prices have caused the utilization and margins of our power plants to deteriorate significantly," said Peter Terium, the chief executive officer of RWE, in a statement accompanying the quarterly earnings report. "Many of these stations are incapable of covering their operating costs, forcing us to take them offline either temporarily or permanently. Since the summer of 2013, we have decided to take such steps several times, most recently earlier this August. In total, they relate to gas and coal-fired power stations in Germany and the Netherlands, accounting for about 6,300 megawatts in net installed capacity.

"In addition, we decided against extending contracts for the use of German hard coal units owned by third parties. This will end our access to a total capacity of approximately 2,700 megawatts."

RWE is planning to shut down more than 1,000 MW of power plants: the Goldenbergwerk lignite power plant in Hürth (110 MW) is to be removed from the grid in the third quarter of 2015; the Westfalen hard coal power plant in Hamm (285 MW) in early 2016; and, if coal market conditions remain weak, the coal-fired units in the Gersteinwerk plant in Werne (610 MW) in the first quarter of 2017. Gas turbines (110 MW) at the Gersteinwerk plant are expected to remain operational. In addition, about 470 MW of supply contracts have been deemed unprofitable and will be terminated at the end of this year.

"Conventional electricity generation is losing ground--not just at RWE," Terium said in the statement. "According to the German Federal Network Agency, German power plant operators plan to shut down stations accounting for over 11,000 megawatts of generation capacity by the end of 2018. As a result, far more secured capacity will probably be taken off the market than will be added through investments. This does not bode well for security of supply, to which wind turbines and solar panels cannot make a large contribution."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.