Connect with us

Business

Divest brown coal or risk losing out in renewables race, ENKRAFT tells RWE

Divest brown coal or risk losing out in renewables race, ENKRAFT tells RWE 1

By Christoph Steitz and Tom Käckenhoff

FRANKFURT/DUESSELDORF (Reuters) – RWE risks falling behind in the fast growing and competitive renewables sector if it fails to quickly divest its brown coal activities, activist fund ENKRAFT said, criticising management for failing to come up with a rapid solution.

ENKRAFT in September disclosed a small stake in RWE, Germany’s largest producer, calling for a separation of the group’s brown coal division to shrug off a valuation discount that has weighed on shares.

In a letter to RWE’s management dated Dec. 3, ENKRAFT said RWE did not address the issue at its capital markets day in mid-November, when the group said its value would rise as part of a 50 billion euro ($56.6 billion) investment push.

“Consequently, we have the impression that you fail to recognize the great strategic and economic importance of this issue for all RWE stakeholders,” ENKRAFT managing director Benedikt Kormaier wrote in the letter seen by Reuters.

“If you continue to avoid detailing a rapid solution of this problem, investors will have to ask themselves whether the Management Board and Supervisory Board are up to the company’s key strategic challenges,” he added.

RWE had no immediate comment.

ENKRAFT reckons that divesting brown coal – which is not part of RWE’s core renewables business – will likely raise the firm’s value by 20 billion euros, or 30 euros per share. RWE’s shares closed at 34.64 euros apiece on Friday.

Moreover, brown coal remains a drag at a time when larger utility rivals and cash-rich oil majors have all outlined plans to aggressively expand in renewables.

“A reluctance to quickly move forward with the divestment of non-core activities jeopardizes RWE’s ability to remain a successful and independent competitor in the sector in the long term,” Kormaier wrote.

At 7.8, RWE’s EV/EBITDA multiple trades at a discount to Denmark’s Orsted (14.8), Portugal’s EDPR (14.1) and Spain’s Iberdrola (9.2), Refinitiv data shows.

($1 = 0.8835 euros)

(Reporting by Christoph Steitz; editing by Grant McCool)

Editorial & Advertiser disclosure
Our website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
Global Banking and Finance Review Awards Nominations 2022
2022 Awards now open. Click Here to Nominate

Advertisement

Newsletters with Secrets & Analysis. Subscribe Now