RWE dividend cut makes shares bleed

Germany's second-biggest power supplier, RWE, on Wednesday posted a net loss of about 200 million euros ($223 million), down from a net profit of 1.7 billion euros in 2014. The nosedive was triggered by a 2.1 billion euro impairment charge on plants in Germany and Britain, and compounded by a 900-million-euro writedown in deferred taxes. A plunge in wholesale power prices further dented the supplier's bottom line.

The "unusually weak" earnings prompted the management board to "propose…a suspension of the dividend payment to holders of common shares for fiscal 2015," RWE said, adding that holders of preferred shares would still receive a payout of 0.13 euros per share.

The dramatic decision sent the group's shares slumping to a four-month low of nearly 14 percent, before recovering slightly in late trading. "Scrapping the dividend is a devastating signal, you couldn't send a worse one," a trader said.

Between a rock and a hard place

CEO Peter Terium stressed that the board's decision "did not come easily," but noted that RWE was caught between a rock and a hard place. "We know that we might disappoint many shareholders. However, it is necessary in order to strengthen our company," Terium said.

RWE's hardships reflect a broader pain felt by Germany's conventional energy industry as the country seeks to transition from fossil fuels, such as nuclear and coal, to renewables, including solar and wind. This so-called Energiewende policy, launched by Chancellor Angela Merkel in 2011 to combat climate change, would see Germany's remaining nine nuclear plans close by 2022.

Traditional providers have complained that the cost of having to close down their nuclear power plants and the generous subsidies afforded their renewable energy rivals have left them bleeding.

'Unlikely to change'

Adjusted for one-off effects, net profit amounted to 1.1 billion euros, at the lower end of the forecasts, and underlying or operating profit totaled 3.89 billion euros, RWE said.

Looking ahead, RWE said it expects to report earnings before interest, tax, depreciation and amortization (EBITDA) to come in between 5.2 billion euros and 5.5 billion euros this year. Adjusted net profit was forecast at 500-700 million euros. "This represents a considerable decline compared to 2015," the group said.

Despite the bleak outlook, net debt and headcount at group level were "unlikely to change significantly compared to 2015," it said.

In December, RWE announced plans to spin off its renewables, grids and retail operations and take the unit public.

pad/hg (AFP, dpa, Reuters)