Image credit: RWE
RWE AG has committed to a major green energy buildout over the next three years, following the addition of E.ON renewable assets in a year when profits soared.
Releasing its full-year results for 2019 this week, the group announced plans to invest €5 billion (US$5.6 billion) to add 4GW of solar and wind to its portfolio by 2022, building on the capacity it already absorbed from E.ON via a complex asset swap that closed last year.
The update shows net income more than doubled from €591 million (US$662 million) in 2018 to €1.2 billion (US$1.34 billion) in 2019. The year-on-year surge was due to the “exceptional trading performance” and a “strong” gas and LNG [liquefied natural gas] business, RWE said.
Going forward, however, the Essen-based giant – who employs nearly 20,000 people worldwide – will double down on green energy growth. The renewable buildout is meant to help RWE become carbon neutral by 2040, following its success halving carbon emissions since 2012.
The “new strategic focus” on renewables will involve a redrawing of RWE’s business lines, with operations split into the four new core areas of Offshore Wind, Onshore Wind/Solar, Hydro/Biomass/Gas and Supply & Trading.
According to the firm, the assets sitting in the newly-formed Onshore Wind/Solar division recorded an EBITDA of €442 million (US$496 million) in 2019. The unit is expected to post €500-600 million (US$561-674 million) in 2020, passed by Offshore Wind’s predicted €1.1 billion (US$1.23 billion).
Asset swap gives RWE headstart in renewable race
RWE’s renewable campaign is expected to require annual investments of at least €1.5 billion (US$1.68 billion) in the coming years. Of the 4GW of wind and solar the group wants to deploy by 2022, 2.7GW is already being built, with a further 20GW-plus pipeline under consideration.
This week’s update evidenced how instrumental E.ON asset swap has been for RWE’s renewable portfolio. The deal – revealed in 2018 and approved by the EU in late 2019 – was the key driver of green power output jumping between 2018 (9.9TWh) and 2019 (16.4TWh), RWE said.
At 4.5TWh of the overall 16.4TWh, the green energy assets sold by E.ON – which in turn bought RWE’s 76.8% stake in innogy – already proved sizeable last year. By contrast, RWE’s European Power unit accounted for 2.2TWh, split between the Netherlands, Belgium, the UK and Germany.
According to RWE, the asset swap has also boosted its footprint in US renewables. The country is now the group’s fourth largest generation market, with solar highlights including the commercial launch of a 100MW plant in Texas a 30-year PPA for a 195.5MW facility in Georgia.
So far, solar has played a less-central role in RWE’s green energy portfolio, based on this week's results. Where the group owns 128MW in already installed PV capacity worldwide, it counts with 1.9GW of offshore wind and 5.9GW of onshore wind.
For its part, RWE’s non-renewable portfolio remains significant. At 13.9GW in installed capacity, gas is the top source, followed by lignite (10.2GW), hard coal (3.9GW) and nuclear (2.7GW). Except for gas, every non-renewable segment saw a generation drop from 2018 to 2019.
Feb 03 - Feb 04, 2021
The business of solar is changing, as the industry scales up, technology, IT and new players to the market will add complexity. This sparks a host of opportunities such as co-location of solar and storage and the rise of unsubsidised solar projects as well as challenges which will question the very business model of European solar asset owners. Solar Finance & Investment Europe is the meeting place for institutional investors, sovereign wealth funds, solar, wind and storage funds and large energy buyers to do business.