Debt forces RWE to scale back offshore ambitions

3% of 2012 group result generated by RWE Innogy

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RWE is scaling back its offshore wind ambitions and, in future, will build just one project at a time. "This way there will be no accumulation of risk," explained Peter Terium, RWE's chief executive officer, today. The group’s high debtload is a primary reason for the planned slowdown in offshore wind development, he acknowledged.

The fifth-largest energy utility in Europe, RWE owns rights to develop offshore wind projects in the UK, Germany and the Netherlands. It views the UK as a less risky market for offshore wind development than Germany, said Terium during discussions about the group’s 2012 financial performance and its outlook.

RWE is building two offshore projects at the moment. Its dedicated renewables business, RWE Innogy, has a 60% stake in the 576MW Gwynt y Môr wind farm, due for full commissioning in the third quarter of 2014. It is also building the 295MW Nordsee Ost wind farm, for which first power is scheduled in mid-2014.

Full commissioning of Nordsee Ost has been delayed until at least the last quarter of 2014 - more than a year later than planned - and this is the primary reason for a cut RWE Innogy’s forecast profit. The original figure of €500m RWE Innogy operating result for 2014 has been revised downward to "more than €300m."

Last month, news emerged that RWE plans to sell 50% of its 90MW Rhyl Flats operational wind farm, while it is making progress toward completing permitting for its 1.2GW Triton Knoll concession.

RWE Innogy’s 2012 operating result was €183m, representing 3% of the group’s operating result of €6.4bn. Group revenue totalled €53.2bn.

An increase is expected in RWE Innogy’s 2013 revenue thanks to its 50% stake in the 504MW Greater Gabbard offshore wind farm, fully commissioned in September 2012. But with offshore wind development so capital intensive, the group’s annual report notes that "RWE Innogy's growth strategy continues to have a negative impact on the bottom line".

Debt holds back offshore growth

Debt is an issue for the utility, with net debt totalling €33bn at the end of 2012, up €3.1bn on 2011. The company is "having to slow investment in renewable energy for financial reasons," acknowledged Terium.

RWE Innogy will invest €1bn in 2013 but this will drop to € 500m in each of 2014 and 2015, considerably less than originally planned, announced Terium. A target of 4.5GW in renewables capacity either under construction or in operation by the end of 2014 will not be met. A shortfall of about 1GW is forecast.

Renewables now account for 8% of RWE's overall generating capacity of 52GW, more than nuclear, at 7.5%. But the company remains focused on fossil fuels, with coal and lignite taking a 23% and 21% share respectively. Gas generation has the largest share, at 30%. Only around 5% of RWE Group's 70,208-strong workforce sits within its renewables segment.

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