Utility Week

UTILITY Week 26th February 2016

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Finance & Investment This week RWE to reveal details of Npower overhaul German energy giant to set out 'comprehensive' restructure with full-year results on 8 March RWE is set to announce details of a "comprehensive restructure" of Npower next month as it seeks to cut costs across the business by €2.5 billion by 2018. The German energy giant is overhauling its global business, with an Eon-style split of tradi- tional generation from supply, grid and renewables operations announced late last year. It has already exceeded its own incremental cost-cutting targets, and has raised the final target by €500 million to €2.5 billion. RWE has also announced a suspension of dividend payments to common shareholders for the 2015 financial year, blaming the decision on a "continued collapse" in power prices and "political risk". RWE said: "The company intends to initiate additional measures to improve its operational strength. The focus lies on conventional power generation and the UK supply business, which will be restructured comprehensively." An RWE spokeswoman said details of the restructure would be announced at the full-year results on 8 March. She said the bulk of the extra €500 million savings would come from Npower's supply business and from traditional generation, including that in the UK. The group recently sold Lynemouth power station to Czech utility EPH, and is open to further divestments RWE also previewed unaudited figures from its full- year results, including a €2.1 billion write-down on its UK and German power stations, an operating profit of €3.8 billion and an adjusted net income of €1.1 billion. It predicted a further fall in earnings this year. TG ElEctricity Drax profits down by two-thirds Drax Group has blamed dete- riorating market conditions and changes to government policy for a two-thirds fall in its pre-tax profits to £59 million. Ebitda fell by just over a quarter to £169 million (2014: £229 million) according to the firm's preliminary results for the 2015 financial year. Reported earnings per share fell to 11.3p (2014: 23.7p). Group chief executive Doro- thy Thompson told Utility Week: "The biggest factor is a dramatic fall in the commodity market, and particularly power prices… Margins we make from coal generation are the lowest we've seen for over a decade." She added: "We have put in place a number of mitigating measures and that includes a programme of cost cutting." Thompson said profits also took a big hit from the removal of levy exemption certificates over the summer. ElEctricity Greencoat defies low power prices Wind power investor Greencoat UK Wind has reported net cash generation of £48.3 million, which is "in line with budget", despite lower-than-forecast power prices in 2015. In its annual report for the year ended 31 December 2015, Greencoat said its wind power investments had generated 799.3GWh of electricity, 8 per cent above budget, because of "high wind resource". However, the average power price in 2015 was below budget and, with 40 per cent of the group's revenues subject to float- ing power prices, net cash gener- ated was £48.3 million (compared with £32.4 million in 2014). Gas BG thrives as parent Centrica struggles Centrica's 2015 adjusted operat- ing profit was down 12 per cent to £1,459 million (2014: £1,657 million). However, operating profit at its residential energy supply business, part of British Gas, rose 31 per cent to £574 million (2014: £439 million), reflecting "higher gas volumes due to more normal weather conditions, and lower costs [including ECO costs]." Brit- ish Gas's total operating profit was down 2 per cent to £809 million (2014: £823 million). Chief executive Iain Conn said the group had delivered a "resilient financial performance" in "a very challenging environ- ment". Adjusted earnings per share were down 4 per cent to 17.2p, and the dividend was cut from 13.5p in 2014 to 12p. See analysis, p19 RWE will split grid from conventional generation Utility WEEK | 26th FEbrUary - 3rd March 2016 | 17 Stock watch 97.5 98.0 97.0 96.0 95.0 96.5 95.5 94.5 TRIG shaRe pRIce, 17 - 23 FebRuaRy 17 Feb 18 Feb 19 Feb 22 Feb 23 Feb 1.010 1.015 1.005 1.000 0.995 0.990 0.985 0.980 0.975 TRIG shaRe pRIce, FebRuaRy 2015 - FebRuaRy 2016 Feb 2015 Jun 2015 0ct 2015 Feb 2016 Shares in The Renewable Infrastructure Group (TRIG) fell 4p to 94.8p on 17 February aer the company announced a half year dividend of 3.11p. The stock regained some ground but fell again the following Tuesday when TRIG reported a £5 million decline in pre-tax profits to £17 million. In its full-year results, TRIG said more than £20 million was wiped from its earnings by the government's withdrawal of Levy Exemption Certificates last summer.

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