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Bloomberg
RWE AG, with some of its legacy coal plants dating back to the 1950s, is this year outperforming new green rivals that are supposed to be the future of the energy industry — as well as every other company on Germany’s main stock index.
With investors brushing aside news of a scrapped dividend to most shareholders for a second consecutive year and another multi-billion-euro writedown on its conventional power plants, the Essen, Germany-based company gained 12 percent this year. Reasons for the utility’s best start to the year since 2014 can be found in October’s initial public offering of Innogy SE as well as a long-awaited recovery in wholesale electricity prices.
To save itself from an outdated utility model operating in the brave new world where green energy gets most of the favors, RWE shifted its renewables, grid and retail arms into Innogy. The proceeds of 2.64 billion euros ($2.78 billion) was a welcome boost to its balance sheet — until last year savaged by a power-price rout lasting half a decade.
Benchmark power contracts have gained more than 20 percent since September. The market has started to notice the recovery, while it hasn’t been fully priced in yet, Ahmed Farman, an analyst at Jefferies International Ltd., said by phone from London.
By contrast, Innogy and EON SE, which spun off its fossil-fuel business last year, have little exposure to the daily swings of energy markets.
RWE, which dates back to the 19th century, gets a majority of its electricity from hard coal and lignite. Lothar Lambertz, a company spokesman, declined to comment on the performance of its shares this year.
By comparison, Innogy gained 2.6 percent this year, while EON rose 7.5 percent. Enel SpA, Europe’s biggest utility by market value which has bought back its renewable subsidiary, dropped 5.4 percent.
Some investors may also have preferred RWE over French utilities as German stocks are considered a hedge by JPMorgan Chase & Co. against the political risks in the run-up to the French presidential election.