German utility major RWE AG (RWEOY) Wednesday reported lower profit for the first half of the year, hit by hefty impairment for its Dutch generation portfolio. The company further backed its full- year outlook.
"Due to the continuing boom in solar energy, many power stations throughout the sector and across Europe are no longer profitable to operate," the company said in a statement. It decided to take off 3,100 MW of generation capacity in Germany and the Netherlands.
The company had said in April that it would be virtually impossible to maintain its earnings level after 2013, amid the difficult outlook for conventional electricity generation.
RWE also noted that the energy sector continues to be burdened by low prices on the electricity markets. However, during the period under review, the utility was able to offset these burdens due to a positive outcome from the arbitration proceedings with Gazprom.
RWE had said in late June that an arbitration court ruled in its favor in a dispute over the company's gas supply contracts with Russian gas pipeline systems operator OAO Gazprom (OGZPF, OGZPY, GAZP). However, the company did not disclose how much compensation it would receive.
Net income for the first half of the year fell 38.2 percent to 979 million euros ($1.3 billion) from last year's 1.58 billion euros, due to an impairment loss of about 800 million euros recognised for the firm's Dutch generation portfolio.
Recurrent net income, used for calculating dividend, increased 19.4 percent to 1.988 billion euros due to the one-off effect of the positive Gazprom arbitration decision.
For the first half, operating result increased by 12.3 percent to 4.09 billion euros, and EBITDA was up 9.1 percent to 5.5 billion euros.
RWE's external revenue improved 5.3 percent to to 28.53 billion euros from 27.09 billion euros last year.
Electricity production dropped 1.1 percent to 111.3 billion kilowatt hours or kWh and External electricity sales volume dropped 4.1 percent to 135.9 billion kWh. RWE's industrial and corporate customers segment experienced a sharp decline after the utility stopped auctioning off electricity in Germany from January 1.
External gas sales volume was 194.2 billion kWh, an increase of 17.5 percent from last year, helped by cold weather conditions.
RWE confirmed its forecast for 2013 of operating result of 5.9 billion euros and recurrent net income of 2.4 billion euros.
While affirming the forecast, it said the increase in EBITDA and operating result is based on the one-off effect of the positive arbitration decision regarding a gas procurement contract with Gazprom and that this cannot be extrapolated for the year as a whole.
Domestic peer E.ON AG (EONGY.PK) had Tuesday reported lower underlying profit and EBITDA for the first half of the year, in line with its expectations. The utility noted that its full-year earnings forecast, which the firm confirmed, continues to be significantly influenced by the difficult business environment in the energy industry.
RWE climbed 4.5 percent on Tuesday in Frankfurt to close at 22.36 euros.
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