RWE warns of impact of emission charge increases on coal power

RWE has warned of "drastic" consequences for the energy group if plans by the German government to increase emissions charges for older coal-fired power stations go ahead.

The overall operating result, earnings before interest and tax, at the company dropped 5 per cent from €1.7bn to €1.6bn in the first quarter with the group blaming a "persistent drop" in margins for conventional electricity generation. 

Like its rival Eon, which last week reported a fall of 15% in underlying net income for the first quarter, earnings at RWE have been squeezed by the German government backing renewable energy.

The subsidised expansion of clean energy, which now accounts for more than a quarter of electricity generation in Germany, has led to a glut of power production that has pushed down wholesale prices.

Utilities are also under pressure as Berlin seeks to cut carbon dioxide emissions by imposing penalties on older and more polluting plants.

RWE's chief financial officer Bernhard Gunther said the emissions proposals would have "drastic economic consequences".

He said in a statement on Wednesday: "We would have to shut down two out of our three lignite mines and 17 out of our 20 lignite-fired power stations." Thousands of coal miners and workers in power plants marched against the plans in Berlin last month, warning of job losses.

 The German economics ministry has promised to review the impact on employment before going ahead with the plans.

RWE's operating result from conventional power generation dropped 23 per cent from €559m to €428m in the first quarter.

Mr Gunther said: "As expected the crisis in conventional power generation continues and this leads to shrinking profits there."

However, RWE's gas supply business benefited from a colder winter compared with the mild first quarter of 2014.

The company's net income rose to more than 2bn in the first quarter, a one-off effect from the €5.1bn sale of its oil and gas arm Dea to Russian billionaire Mikhail Fridman's fund L1 Energy. The sale of Dea has reduced RWE's net debt from €31bn at the end of last year to €27.7bn at the end of March this year.

Recurrent net income for the first quarter rose 10 per cent to €877m from €797m.

RWE confirmed a forecast for 2015 of an operating result between €3.6bn and €3.9bn and recurrent net income of between €1.1bn and €1.3bn.

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