Electricity shortages, climate-friendly energy generation, gas price caps or even windfall tax, the list of issues currently occupying utilities is long. In some cases, however, the all-clear can be given. In mid-November, for example, the Federal Network Agency announced that the total storage level in Germany is 100%. In addition, an energy price brake is to take effect from next year to counter price increases. On the other hand, uncertainty still prevails with regard to the windfall tax. The state would like to skim off the extra profits with taxes, but numerous companies are resisting this. The energy company RWE is also critical of the plans. According to CFO Michael Müller, companies must also make a contribution during the crisis, but the levies must be "appropriately structured".
When it comes to transformation in energy generation, on the other hand, there is a consensus. Companies and politicians alike are gearing up for a sustainable future. RWE already gave its business model a green makeover a few years ago and is making rapid progress in the switch to wind power, photovoltaics and hydrogen. Last year, the company already generated 32 terawatt hours of electricity from eco-sources, making RWE one of the world's largest suppliers of renewable energy. The Group is not resting on its laurels, however, but is continuing to pursue an ambitious plan. Total output is to increase by an average of 2.5 gigawatts (GW) per year and installed capacity is to rise to 50 GW by 2030. The fastest growth is expected in the offshore wind and solar sectors (see chart). To achieve the goal, RWE is putting a lot of money in its hands: a whopping EUR 50 billion is to flow into the strategy by the end of the decade.
"We are ideally positioned to actively shape the key decade of the energy transition," says CEO Markus Krebber confidently. His so-called "Growing Green" plan is also aimed at higher profits. The CEO expects adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) in the new core business to improve by 9% a year on average and swell to EUR 5 billion by 2023. By way of comparison, RWE only generated Ebitda of just under EUR 2 billion with renewables in 2016. The rising profits will also directly benefit shareholders. 50% to 60% of adjusted net income is to be distributed annually as a dividend.
RWE's green agenda is supported by the long-initiated reform of the European energy system, which is even gaining pace due to the conflict with Russia. The EU Commission's "RePowerEU Plan" previously set a target of 32% for the share of renewable energies by 2030, but this has now been increased to 45%. But it is not only on the continent that sun and wind are the focus of attention. In the USA, too, US President Biden is pushing the issue and plans to invest USD 386 billion in eco-technologies, more than any country ever before. Good for RWE, the Essen-based company is also very active overseas. A few days ago, the German utility strengthened its position in the country with another purchase of a lease area for the development of an offshore wind farm with up to 1.6 GW. This gives the now fourth-largest renewable energy provider an offshore wind portfolio in the U.S. of around 4.6 GW. "We have a clear objective to establish RWE as a major player in offshore wind in the United States, one of the most important strategic markets for the expansion of our portfolio," Sven Utermöhlen, head of the offshore unit of the Renewables Division, commented on the deal.
RWE's eco-strategy is well received on the stock market. With a plus of 18%, the share is in second place in this year's DAX ranking. Even if the analysts' guild still sees further upside potential - the average 12-month price target is EUR 51 - RWE does not need to gain any further at all for investors to achieve a graceful yield of 11% p.a. with the stock. The new euro-denominated Softcallable Barrier Reverse Convertible has a correspondingly high coupon. The profit opportunity is hedged by a risk buffer of 35%. The counterpart offered in CHF also has an identical barrier distance. The coupon rate for this product is an attractive 9% p.a. If the DAX member does not breach the barrier during the maximum term of 18 months, the maximum yield will be achieved in both cases.
An even higher yield is possible if three more energy suppliers are added to RWE. Thus the new Multi-BRC on RWE, E.ON, Enel and Engie holds out the prospect of a return of 13% p.a.. The product also gives the underlyings more leeway on the downside. The risk buffer amounts to a comfortable 45%. In all three products, the issuer's soft callable feature allows early termination after half a year at the earliest.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.