RWE AG

XETRA:RWE

Earnings Call Transcript 2021-Q3

[Charline Hebling, Manager of Investor Relations]

Welcome to the interview on the business performance for the first 3 quarters of 2021. Together with Mike Muller, the CFO of RWE AG, we will take a look at the key developments. Hello, Mike, thank you for being here today.

[Michael Muller, CFO & Member of Executive Board]

Yes. Thank you. I'm really happy to be here.

[Charline Hebling, Manager of Investor Relations]

Let's start with the renewables business. Our goal is to expand our installed capacity from wind and solar farms to more than 13 gigawatts by the end of 2022. How do you think we are doing in this regard?

[Michael Muller, CFO & Member of Executive Board]

As of September 30, our installed capacity from wind and solar amounted to 9.5 gigawatts. Additionally, all of our wind turbines have now been installed at our offshore wind farm, Triton Knoll, which will contribute about 500 megawatts to our generation portfolio after it is fully commissioned. By the end of this year, wind, solar and battery projects with a capacity of 0.8 gigawatt will start operating commercially, followed by another 3 gigawatts in 2022. These projects span from Europe and the U.S., all the way to Australia. We are confident that we will reach our target of more than 13 gigawatts in our wind and solar business by 2022. Our CapEx figures also reflect this. In the first 3 months, we invested about EUR 2.5 billion in our wind and solar business.

[Charline Hebling, Manager of Investor Relations]

Our successful bids for a site in the German North Sea also demonstrates that we are making progress with expansion. What projects are we planning there?

[Michael Muller, CFO & Member of Executive Board]

At the auction held by the German Federal Network Agency in September, we placed a winning bid for a site in the North Sea, where we can build a wind farm with a capacity of 225 megawatts. Together with Northland Power, we also exercised our so-called step-in rights for another North Sea lease, where we plan to build a 433 megawatt wind farm. We will not receive a guaranteed minimum price by the state for either projects. Instead, we were marketing the electricity ourselves, for example, based on power purchase agreements.

[Charline Hebling, Manager of Investor Relations]

Of course, the energy transition has accompanied by various challenges and opportunities. But the development of electricity and gas prices over the last few weeks has even surprised the experts in terms of its scale. Electricity prices hit an all-time high and gas prices also skyrocketed, what does this mean for our business?

[Michael Muller, CFO & Member of Executive Board]

I was actually also surprised by the scale of the commodity price movements recently. Several factors came into play. On the one hand, gas storage levels are currently relatively low, and demand from LNG in Asia has sharply risen. And at the same time, we are seeing high gas demand from industry. As a consequence, gas-fired power plants in Germany and in the Netherlands were hardly operating. On the other hand, electricity generation for wind has been low due to poor weather conditions. Despite the addition of new capacities, electricity generation from wind dropped by 5%. In contrast, the German lignite fleet and the Dutch hard coal fire plants, in which we co-fired with biomass, were heavily utilized. As we had sold forward already all our generation capacity, we are not directly affected by the price developments.

[Charline Hebling, Manager of Investor Relations]

Let's talk some more about the results. For the first 3 quarters, adjusted EBITDA for the RWE group amounted to EUR 2.4 billion and was higher compared to last year. In our core business, we registered a decline of 11%. By contrast, the adjusted EBITDA for the Coal/Nuclear segment rose from EUR 381 million to EUR 720 million. What were the value drivers for our earnings?

[Michael Muller, CFO & Member of Executive Board]

The Offshore Wind and Onshore Wind/Solar segment suffered from unfavorable wind conditions. Of course, there was also the Texas effect from February, which impacted our earnings in the Onshore Wind segment by around EUR 400 million. Adjusted EBITDA in the Hydro/Biomass/Gas segment increased by 13% to EUR 430 million. The main driver were higher capacity market payments in the U.K. and additional income from daily asset optimization. Compared to previous year, Supply & Trading did extremely well, posting earnings of EUR 609 million. The main reason that the adjusted EBITDA of the Coal/Nuclear segment rose by around 90% versus last year was higher hedged wholesale margins. As I just mentioned, we had already sold almost all of our electricity forward. All in all, we are very satisfied with the results and can confirm our guidance for 2021.

[Charline Hebling, Manager of Investor Relations]

Thank you very much for the explanations, Michael. And thanks to all of you for listening. Goodbye, and see you soon.