RWE AG may report its first annual loss since at least 1988 after billions of euros in writedowns amid a slump in power prices for Germany’s biggest generator.
The company, which reports 2013 results tomorrow, announced impairments of about 4.7 billion euros ($6.5 billion) on reduced usage of its fossil-fuel plants. RWE will report a net loss of almost 3 billion euros, Handelsblatt newspaper said, citing people close to the supervisory board it didn’t name.
RWE will “put all in” its 2013 results, exploiting all depreciation and amortization options for a fresh start, said Thomas Deser, a portfolio manager at Union Investment, who manages a stake in RWE valued at about 71 million euros.
RWE and rival EON SE (EOAN) are closing plants, cutting dividends and selling assets after wholesale power prices tumbled, making many generators, particularly gas-fired plants, unprofitable. Essen-based RWE said this year it had permission from the grid operator to idle 2,327 megawatts of gas-fired capacity in Germany and will mothball a 1,300-megawatt station in the Netherlands that opened in 2012.
Nine analysts surveyed by Bloomberg estimate a 930 million-euro net loss for 2013 compared with a profit of 1.3 billion euros a year earlier. Estimates range from a 2.5 billion-euro loss to 887 million-euro profit.
RWE closed down 1 percent at 28.715 euros in Frankfurt trading, while the German benchmark DAX index sank 3.4 percent.
Recurrent net income, the measure used to calculate the dividend, will fall to 1.3 billion euros to 1.5 billion euros this year from about 2.4 billion euros forecast for 2013, RWE said in November. The impairments won’t effect that measure, while they will lower net income.
The executive board will forgo 500,000 euros in compensation in 2014 in light of the “difficult situation,” Chief Executive Officer Peter Terium said last week.
Weak energy demand, combined with Germany’s move to wind and solar energy that now make up 23 percent of generation and take preference on the grid, have pushed prices lower. Gas-plant profitability has been in decline since 2009 and utilities have been losing money by burning the fuel for power since 2012, according to data compiled by Bloomberg.
RWE’s operating result for conventional power generation fell 64 percent to 841 million euros in the first nine months of 2013 from a year earlier.
Deser said he expects the company will return to profit in 2014. The loss will “remain unique for the foreseeable future.”
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