RWE Restructures Power Generation Business

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German energy major RWE AG (FWB:RWE) (Essen, Germany) has announced a restructuring of its conventional power generation business and revealed that cuts will be made at its renewable energy company, innogy, following a profit warning in December.

From January 1, the company's gas, hard coal, hydroelectric power and biomass generation business will be pooled within RWE Generation SE while the new RWE Power will be in charge of electricity production from lignite and the strategic management of nuclear energy.

"We want to reposition our portfolio effectively in a changing market environment," explained Dr. Rolf Martin Schmitz, chairman and chief executive officer of RWE AG. "This is why we decided last year to make our electricity generation companies more flexible, while aligning them more closely to their respective energy sources."

Last month, innogy Chief Executive Officer Peter Terium was replaced after a profit warning that hit the share value of parent company RWE AG. In a statement, the company said: "The Supervisory Board generally welcomes the corporate and finance strategy pursued by the Board, but sees the necessity for greater emphasis on cost discipline and a more focused growth and investment strategy."

Terium was also chief executive officer of RWE AG from 2012 to 2016 and was instrumental in completely overhauling the company to deal with Germany's sudden decision to abandon nuclear power in 2011 and shift to more renewable energy. Dr. Werner Brandt, chairman of the supervisory board of innogy SE, commented: "Under his leadership, RWE AG, the parent company of innogy, has found the right answer to the German energy transition. Today, innogy is considered a pioneer for a sustainable and smart energy supply and thus, it is a jewel in the German energy industry".

RWE spun off the more profitable innogy business in late 2016, Germany's biggest public listing in 16 years. At the time, Industrial Info reported that that the new company was valued at 20 billion euro ($22.4 billion). For additional information, see October 17, 2016, article - RWE Spins-Off 'innogy' in $22 Billion Listing.

RWE has been actively trying to reduce its lignite-based assets. Last month the company, alongside EnBW (FWB:EBK) (Karlsruhe, Germany), decided to sell their combined shares amounting to almost 73% in Hungary's second largest power plant, Matrai, for an undisclosed sum. The coal-fired plant has a generating capacity of 950 megawatts (MW).

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