Exclusive-RWE's top shareholder group opposes call for more share buybacks

By Tom Käckenhoff and Christoph Steitz

DUESSELDORF/FRANKFURT (Reuters) -RWE's municipal shareholders, the biggest investor bloc in Germany's top power producer, are opposed to calls for more share buybacks, including from activist investor Elliott, saying they would drain cash needed for renewable investments.

The rare comments by the Association of Municipal RWE shareholders (VkA), which together hold around 14% in the utility, provide support for RWE management amid growing investor criticism of its capital allocation.

RWE in March followed peers in cutting investments due to falling returns for renewable projects, prompting some investors to urge the group to increase and speed up an existing 1.5 billion euro ($1.7 billion) buyback programme instead.

These included Elliott, which holds close to 5% in RWE and is currently also running a high-profile campaign for change at oil major BP. Elliott has said RWE shares are undervalued and that it was "disappointment with the lack of clarity" over RWE's commitment to shareholder value.

Other investors, most notably Deka Investment, Selwood Asset Management and Enkraft Capital, have also asked the group to expand buybacks to boost its shares, with Union Investment even calling for a special dividend.

"The municipal shareholders do not support demands for a special dividend or share buyback programmes," Detlef Raphael, VkA's managing director, told Reuters, marking the first time RWE's municipal shareholders have commented on the matter.

"The moment I give out money or buy back shares on a large scale, I lack the capital for investments in renewable energies," he added.

"The municipalities are supporting RWE's path."

The VkA represents shareholding cities, municipalities, districts and associations, mainly from North Rhine-Westphalia where RWE is based.

RWE, which is holding its annual general meeting on Wednesday, has said that buybacks would remain part of its future strategy, but has so far not amended its existing programme, which runs until the second quarter of 2026.

($1 = 0.8787 euros)

(Reporting by Tom Kaeckenhoff and Christoph SteitzEditing by Mark Potter)