RWE Plans to Quadruple Renewable Power
Date: 22-Nov-07
Country: GERMANY
The company, seeking to cut generating costs, plans to increase investments mainly in windpower on- and offshore to at least 1 billion euros (US$1.48 billion) annually from 2008, Chief Executive Juergen Grossmann said on Wednesday.
RWE is raising spending in environmentally friendly generation capacity from a previous figure of several hundred million euros a year as the European Union makes emitting carbon dioxide more costly.
Renewable energy sources are "highly significant ... for our public acceptance and not least for the economic future and growth strategy of our group," said Grossmann, in his eighth week as chief executive of RWE.
"We are still in time to enter this market," Grossmann said.
The utility is seeking to catch up with peers such as Germany's E.ON, the world's largest utility, which has already started spending billions of euros on renewable energy assets in Spain, the United States and Canada.
Utilities aim to increase the use of power sources that do not emit carbon dioxide as the European Union forces companies to have certificates to emit the greenhouse gas and is tightening the supply of those permits, making them more costly.
To coordinate its renewables activities, RWE is setting up a unit to pool some 1,500 megawatts, most of its renewable-energy resources, from February next year, it said on Wednesday.
It named the former chief executive of German windfarm maker Repower head of the division, it said, confirming a newspaper report from Nov. 2.
"The business model includes the planning, construction and operation of plants for renewable power generation and energy recovery," Chief Grossmann said.
The division, called RWE Innogy, will at its start have annual sales of some 400 million euros, about one percent of RWE's overall sales in 2006.
It will have the same profitability targets as the rest of the group, Grossmann said. Generating power using the sun or the wind can cost several times as much as using coal, but the higher costs are cushioned by the legal right to charge more in countries such as Germany.
The utility aims to have some 20 percent of its generation capacity using renewables by 2020, in line with a target for the member countries of the European Union, renewables Chief Vahrenholt said.
Right now, about five percent of RWE's power plants use renewable energy sources. The utility plans to raise that share mainly through expanding existing businesses and to a lesser extend through takeovers.
While the utility's focus is on windpower, it is prepared to invest in all other forms of renewable energies such as hydropower and biomass. It does not plan to invest in Scandinavia or the United States for now, Grossmann said.
It may also invest directly in companies developing reneweable energy and may sell shares in the new division to investors in an initial public offering, Grossmann said.
RWE does not plan to buy plant makers such as windfarm makers, he added, rebutting speculation that RWE was considering entering the engineering business.
The company's shares dropped 1 percent to 90.88 at 1154 GMT, in line with the DJ Stoxx utilities index and less than the German bluechips index, which declined 1.9 percent.
(Reporting by Peter Dinkloh; Editing by Matthew Tostevin)