RWE surprisingly went into red zone in 2015 after reported net loss of 200 million EUR due to strong decrease of electricity prices for corporate clients. The main reason is write-off of 2.1 billion EUR in business with energy from conventional power plants in Germany and UK. The operating profit pf RWE amounted to 3.8 billion EUR and the adjusted net profit of 1.1 billion EUR, complying with forecast range. The power plants of the Europe’s largest energy market are affected by the low prices for capacities since 2002, as the unprecedented transition to renewable energy squeezed margins in traditional business with energy from coal, gas and nuclear power plants.
RWE said in December that will combine business with renewable energy and retail operations into a separate company, part of which will be listed on stock exchange via IPO in late 2016.
Following the latest finance data of the company, RWE intends almost completely to cancel the payment of dividends. For ordinary shares this year will not be paid dividends, while the holders of preferred shares will still receive 0.13 EUR per share, which is 6 times less than previous year. The decision will seriously affect some German municipalities, which hold about 24% of the operator and in previous years funded their budgets by paid dividends.
“The decision is necessary to strengthen the company”, said the CEO of RWE, Peter Terium. “Given on the current economic outlook in conventional power generation, today’s decision on dividend policy is not easy for us”, added he.
The investors were shocked from the news and after the complete removal of the dividend to holders of ordinary shares started serious sale. The market capitalization of RWE collapsed by 10.6% to 10.55 USD per share during the trading session. The price of the preferred shares, of which RWE is still willing to pay 0.13 EUR per share dividend, declined by 8.7% to 8.33 EUR per share. RWE stated that it had issued only 39 million preferred shares suspended and 575.5 million ordinary shares. Last year, RWE’s shares lost 54.3% of its value. Turns in the energy policy of Germany and falling electricity prices for corporate clients is a serious problem for all large German companies in the sector.