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United Kingdom : RWE decommissions further power stations

August 14, 2014

The mild winter and the resulting low demand for heating, together with the continuing low level of prices on the electricity markets, led to a significant decline in RWE s earnings for the first half of 2014. Compared to the first half of 2013, EBITDA fell by 32% to EUR 3.4 billion, while the operating result was down 40% to EUR 2.3 billion. The result for 2013 did, however, include a substantial one-off income resulting from the arbitral ruling in the price revision proceedings with Gazprom. Recurrent net income, adjusted for one-off effects, was down 62% to EUR 0.7 billion. This reflects the difficult operational situation the RWE Group is facing. In addition, the earnings from RWE Dea are no longer included in these figures, since the upstream business is being sold and is disclosed as a discontinued operation with retrospective effect from 1 January 2014. At EUR 25.1 billion, RWE Group revenue was down 10% year on year.

Because of the significant deterioration in prices on the wholesale electricity market, RWE Generation plans to decommission around 1,000 megawatts (MW) of additional generation capacity by 2017 as well as terminating further supply contracts for the use of around 500 MW of capacity. This takes the generating capacity of power stations that RWE is either totally or partially taking offline in continental Europe or no longer utilising on account of the difficult market conditions for conventional power generation to around 9,000 MW.

Conventional power generation is losing ground not just at RWE. Figures from the Federal Network Agency indicate that, up to 2018, more secured power station capacity will have to be taken offline than is added through capital investment. This does not bode well for security of supply, to which wind and solar can make little contribution says Peter Terium, CEO of RWE AG. He expressed his support for a market design which compensates companies that keep secured generation capacity on tap. With a capacity market that is non-discriminatory and open to all technologies, Germany could create an economically feasible basis to continue to operate indispensable generation facilities and thus supplement the expansion of renewable energy. At the same time, he stressed, But we will not rely on the actions taken by the government. The command of our business and our commercial success mainly depend on us.

In the first half of 2014, electricity generation declined by 11% to 100.1 billion kilowatt hours (kWh). This reflects the impact of decommissioning two power stations in the UK (Didcot A and Tilbury), as well as the reduced operating hours of the gas-fired power plants in Continental Europe.

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Source: TendersInfo (India)

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