RWE, the German energy giant that owns UK supplier Npower, yesterday said it had taken a €3.3bn (£2.7bn) hit on its 2013 earnings, mainly due to losses from its coal and gas-fired power plants.
The company said that around €2.9bn of the writedown is attributable to “the significant deterioration in earnings” from its European power plants.
The impairments will eat into net income for 2013 but will not have an impact on core earnings or cash, RWE said in a statement.
“Throughout Europe, gas and hard coal-fired power stations in particular are under substantial economic pressure,” said Peter Terium, chairman of RWE.
“By recognising this impairment, we are taking account of the fundamental changes in framework conditions on the European generation market in particular.
“However, we are already reacting to the difficulties in terms of earnings – with which all European power producers are faced – and are further reducing the costs of our power plant fleet with resolve, in order to increase our earning power.”
Germany’s push for renewable energy now means that it accounts for around a quarter of total production, thanks to generous government subsidies.
The increase in renewables has led to overcapacity, bringing down wholesale prices.
This has hit the generation margins of companies such as RWE and its peers E.On and EnBW, who have all announced plans to close or mothball coal and gas-fired power plants due to dwindling profits.
E,On has not announced any impairment charges. RWE, which is due to unveil its full-year results on 4 March, saw its share price fall over one per cent on the news and ended the day 0.85 per cent down.