RWE Forms New Renewables Unit,To
Invest EUR1 Billion Year
Nov 21, 2007 - Jan Hromadko - Dow
FRANKFURT -(Dow Jones)- RWE AG (RWE.XE) Wednesday
said it will bundle its renewable energy operations
in a new unit from Feb. 1, 2008, amid plans to generate
more than 20% of its power production from renewable
energy sources by 2020, from 5% currently.
The new unit, called RWE Innogy, will invest at
least EUR1 billion per year from 2008 and will focus
on organic growth and strategic acquisitions of companies
and renewables facilities, RWE said. It aims to become
a leading European generator in the area of renewable
energies, the company added.
The pooling of renewable energy operations doesn't
come as a surprise, however the targeted investment
volume is significant, said Sal. Oppenheim analyst
Matthias Heck, who rates the company as a buy.
Heck said RWE's previous investment volume in renewable
energies was around EUR140 million per year, adding
that around 20% of RWE overall investment budget will
go toward renewables from next year.
However, Heck added that it will likely be a couple
of years until the company will be able to cover its
capital costs in the renewable energies sector.
At 1133 GMT, RWE shares traded lower EUR1.20 or 1.3%
at EUR90.59, outperforming a lower broader market.
RWE Chief Executive Juergen Grossmann told reporters
at a press conference that RWE's investment criteria
will also apply to investment conducted by RWE Innogy.
"This means: we expect additional, noteworthy contributions
to value creation from the business area (of)renewable
energies," he said.
RWE is stepping up investment in renewable energies
at a time where other major European peers are already
heavily investing in this area.
RWE's main domestic competitor E.ON AG (EOA.XE) said
at the end of May that it will pool its renewable
energy operations in a separate unit. In the past
few months, E.ON has invested more than EUR1 billion
in the acquisition of wind farms in the U.S. and Spain.
Earlier this month, E.ON raised its investment plan
for renewable energies to EUR6 billion to be invested
by 2010 from the previously planned EUR3 billion.
RWE Innogy's focus will be wind power generation
projects - both onshore and offshore. Additionally,
the unit seeks to grow in the areas of hydro-power
generation, biomass, solar energy, geothermal energy
as well as tidal power projects.
European countries, such as the U.K., France, Germany
and Italy, will be RWE Innogy's core markets for investment.
However, Grossmann didn't rule out investing in renewable
energies in the U.S. if the right opportunities arise.
"First of all we want to achieve our goals in Europe,
but I cannot rule out investment in the U.S., if we
come across a wind project in the U.S. that we like,"
Head of the new unit will be Fritz Vahrenhold, who
has been chief executive of wind power company RePower
Systems AG (RPW.XE), which is majority-owned by India's
Suzlon Energy Inc. (532667.BY).
In the press conference Vahrenholt said the company
will primarily invest in wind power generation given
that this is the most economic of all renewable energy
sources that requires the least state aid.
RWE already operates significant wind power assets
in the U.K. as well as smaller wind farms in Spain,
France and Poland. In the U.K., RWE operates the 60
megawatt North Hoyle offshore wind farm, one of the
country's largest, off the coast of Wales.
RWE will pool around 1.5 gigawatts of generation
capacity in the new unit RWE Innogy, including wind
power assets from its U.K. market unit npower as well
as hydro power assets from its main generation unit
Grossmann said that he wouldn't rule out an initial
public offering of the new unit in the longer term,
but added that such a move isn't currently on the
agenda. In any case, RWE wouldn't aim at selling a
majority of the new unit in any IPO, Grossmann said.
Company Web site: http://www.rwe.com
-By Jan Hromadko, Dow Jones Newswires; +49 69 29
725 503; jan.hromadko@ dowjones.com