EnBW to Fund Green Power Switch With $3.4 Billion Asset Sale

  • Company's 2020 profit to be based on renewables, grids
  • CEO Mastiaux sees pressure on dividend by low power price

Energie Baden-Wuerttemberg AG will sell assets to help transform Germany’s third-largest power supplier into a business centered on renewable energy and operating grids.

Karlsruhe-based EnBW has “a number of assets which are possible for divestment,” including stakes in utilities in Austria, Hungary and Germany, Chief Executive Officer Frank Mastiaux said in an interview. The utility has already sought to close six unprofitable power plants and sold a stake in an offshore wind farm in the past two years.

“We are confident that we are able to achieve over 3 billion euros ($3.4 billion) of disposal income by 2020 as aspired” from now without selling all the assets being considered, he said in Munich Sept. 9.

EnBW, which used to rely on nuclear reactors for more than half of its output, in 2013 unveiled a strategy to more than double the share of renewables in its power mix to 40 percent of installed capacity by the end of the decade from levels in 2012, the year Mastiaux became CEO. Its response to Germany’s shift from nuclear and fossil-fuel generation toward wind and solar power presaged by more than a year larger competitor EON SE’s breakup plan to focus on renewables.

Since EnBW’s strategy change, its shares have lost 13 percent, while EON slumped 33 percent and RWE AG dived 54 percent. Germany’s benchmark DAX stock index has risen by 25 percent.

Mastiaux sees adjusted earnings before interest, tax, depreciation and amortization from renewables more than tripling to 700 million euros by 2020 from 2012, while grids will contribute 1 billion euros to an unchanged total Ebitda of 2.4 billion euros. Earnings from conventional power generation and trading will slump by at least 75 percent to about 300 million euros in the period.

Wind and solar power have surged under Germany’s plan to get as much as 60 percent of its electricity from renewables by 2035, compared with 26 percent now. The switch is hurting traditional utilities as margins at coal and gas-fired plants get squeezed because green power gets priority to the grid. German power prices fell to a 12-year low last month.

“The big challenge is the simultaneity of many difficult issues in a market environment that doesn’t help us,” Mastiaux said. He sees no recovery in power prices, resulting in pressure on dividend payments, he said.

EnBW says it has more German offshore wind capacity in planning than any competitor. It’s to add about 1,700 megawatts to its 48-megawatt Baltic 1 wind farm and its 288-megawatt Baltic 2 facility, which is to be inaugurated Sept. 21. Macquarie Capital holds a minority stake in Baltic 2.

Mastiaux is seeking a possible final investment decision next year for EnBW’s 500-megawatt capacity Hohe See offshore wind-plant project in the German North Sea. It has priority over the utility’s neighboring 400-megawatt Albatros project, he said.

Sales Potential

Potential sales include EnBW’s minority stakes in Austrian utility EVN AG, Hungary’s Elmu-Emasz and MVV Energie AG in Germany, as well as its majority holding in Stadtwerke Dusseldorf AG.

Planned cost cuts of 400 million euros by 2020 may be increased, and additional power plants may be shut when they become unprofitable, Mastiaux said.

The EnBW CEO called for “comprehensive project management” in Germany for the nation’s exit from nuclear power. EON canceled plans to spin off its atomic plants as the country moves to prevent utilities from dodging costs for the disposal of radioactive waste.

“We need planning security,” he said. “A certain political courage is in demand.”

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