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Finance & Investment This week RWE follows Eon lead and splits business German energy giant moves its renewables, grids and retail operations into new company RWE will follow the lead of rival German energy supplier Eon in splitting its business to create a new listed company. In January RWE ruled out an Eon-style split of upstream and supply-side business arms in the near term, but the company sur- prised the market by announcing that it will create an "innovative decentralised energy group" within a year. The new company will take control of RWE's renewa- bles, grids and retail operations in Germany and abroad to create a "platform for growth". RWE will remain a majority shareholder in the company but will focus on the firm's beleaguered conventional power generation and energy trading operations. The move should enable RWE more flexibility to manage the costly state-mandated nuclear phase-out that – combined with weak market signals for thermal generators – has eroded profits in recent years. Chief executive Peter Terium said: "The new subsidi- ary will have its own access to the capital market and improve our growth prospects. At the same time, we are convinced that conventional power generation will remain an irreplaceable partner for renewable energy." RWE reported double-digit operating profit losses in its first half financial results, blaming the continued decline in profits from its conventional generation fleet. In contrast the company says that based on the pro- forma figures for 2015, the new company would achieve external revenue of more than €40 billion and EBITDA of over €4 billion. JA WATER Marginal rise in earnings at SWW South West Water (SWW) has reported a marginal rise in earn- ings before interest, taxation, depreciation and amortisation (Ebitda) for the first half of the financial year, with tighter price controls offset by the merger with Bournemouth Water in April. The company's parent group, Pennon, reported an overall increase in Ebitda of 15.9 per cent to £231.7 million. The water businesses reported an Ebitda of £173.6 million, up 0.8 per cent year-on-year. SWW's Ebitda was up 4.2 per cent to £165 million and Bournemouth Water was up £8.6 million. Water business revenues rose 4.1 per cent to £279.3 million as the tighter price control at SWW was offset by higher than expected customer demand and the contribution from Bourne- mouth Water. WATER Controls fail to dent Severn Trent profits… Severn Trent Water (STW) has reported a 2.1 per cent rise in its profits to £281 million, higher than analyst expectations, despite revenue reduction from Ofwat's new regulatory regime. The group announced its half-year results for the six months to 30 September 2015, attributing the improved mar- gins to a "focus on operational cost efficiencies". Since its preliminary results announcement in May, STW has secured a further £72 mil- lion of efficiency savings, so all £372 million of its target efficien- cies for AMP6 have been locked in, with a further £50 million expected by May 2016. WATER …as UU blames £17m profit drop on Ofwat United Utilities (UU) has blamed a £17 million profit drop in the first half of this financial year on the new regulated price controls set by Ofwat. Underlying profit before tax for the six months ended 30 Sep- tember 2015 was £205 million, £17 million less than last year and £16 million less than Citi analyst estimates. The company said this was a result of the £35 million decrease in underlying operating profit, partly offset by the £18 mil- lion decrease in underlying net finance expense. It added that tighter price controls introduced by Ofwat, as well as increased costs, were to blame. UU chief executive Steve Mogford said: "Our progress over the first six months of this new regulatory period underpins our confidence that our targets remain tough but within reach." RWE says thermal generation is 'irreplaceable' UTILITY WEEK | 4TH - 10TH DECEMBER 2015 | 19 Stock watch 800 820 840 860 880 900 PENNON GROUP SHARE PRICE, 26 NOVEMBER - 1 DECEMBER 26 Nov 26 Nov 27 Nov 27 Nov 30 Nov 30 Nov 1 Dec 1 Dec 2,300 2,250 2,200 2,150 SEVERN TRENT SHARE PRICE, 26 NOVEMBER - 1 DECEMBER Severn Trent Water and Pennon Group share prices increased aer "better than expected" interim results on 26 and 27 November respectively. Pennon rose by 1.69 per cent from 858 pence at 8:00am to 872.50 pence at 9:00am. The price increased to a high of 883 pence at 4:30pm the same day and has since held steady. Severn Trent's share price held steady at 2,209 pence between 8:00am and 11:00am before marginally increasing to 2,213 pence.