RWE to IPO its renewable, grids and retail units next year amid increasingly testing German energy policy

Jessica Morris
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Domestic Oil And Gas Production
Germany wants to close all of its nuclear power plants by 2022 (Source: Getty)

RWE, Germany’s second largest utility, has announced plans to hive off its renewables, grids and retail units, in a bid to adapt to the government’s energy policy.

The company’s chief executive, Peter Terium, yesterday announced plans to create the separately listed company next year, with 10 per cent of its stock being offered to the public through a share issue.

The move comes as part of a restructuring to help RWE better navigate the increasingly tricky Germany energy policy landscape.

The German government wants to generate 80 per cent of its electricity from renewables by 2050, and has divided up subsidies accordingly. However, this has hit wholesale power prices, and operators’ profit margins. The dilemma has weighed on RWE's shares, which have lost around 50 per cent this year.

Read more: Dismantling Europe's old nuclear power plants will run up a €100bn bill for EDF, E.ON, RWE and others

Against this backdrop, operators must also find enough cash to meet the cost of closing down all of the country’s nuclear power plants by 2022. But this is no small task. Credit ratings agency S&P suggests nuclear liabilities of the largest eight nuclear plant operators in Europe totaled €100bn at the end of last year.

"I think that Terium is responding to the most recent political developments. At E.ON there was a certain race for liability, which the company lost," Thomas Deser, senior fund manager at Union Investment, said.

"With his plan, Terium avoids this conflict."

Last year, E.ON unveiled plans to spin-off power plants, energy trading and oil and gas activities into a separate unit, Uniper.

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