Published : 4 weeks ago, on 13/11/2024

By Christoph Steitz, Kanjyik Ghosh and Vera Eckert

FRANKFURT (Reuters) -RWE shares rose 8.3% on Wednesday after the group announced a 1.5 billion euro ($1.6 billion) share buy-back, citing a weaker rationale for investments in U.S. offshore wind after Donald Trump’s election and a slower ramp-up of European hydrogen.

By launching the buyback, which will start during the fourth quarter and run over 18 months, Germany’s biggest utility is succumbing to growing investor pressure to review its capital allocation in the face of challenged returns for clean energy projects.

Analysts received the decision positively. “Capital allocation has been a significant point of debate on RWE,” commented RBC Europe equities research.

RWE also issued better-than-expected nine-month financial results, a slight guidance hike for the full year, and confirmation of a 1.1 euro per share 2024 dividend target.

Its shares had previously lost 27% in the year to date.

The company said the risks for offshore wind had risen in light of the election of Trump, an outspoken critic of the technology, as the next U.S. president. It said its project off the U.S. east coast could be delayed due to outstanding permits.

It also warned that a planned hydrogen ramp-up in Europe was not going as planned, adding this could delay its efforts to build electrolyser capacity, chiming with similar comments by smaller rival Uniper last week.

RWE’s move reflects broader fears of what Trump’s return to the presidency could mean for clean energy investments in the U.S., with parts of current President Joe Biden’s clean technology agenda expected to be scrapped.

However, CFO Michael Mueller said that while there was caution on offshore wind, his company still viewed onshore wind, solar and battery project in the U.S. as attractive, citing energy demand, especially for data centres.

IMPROVED FULL-YEAR OUTLOOK

RWE gave a slightly more optimistic view for 2024, saying it now expected to hit the midpoint of target ranges for adjusted core profit and adjusted net profit, citing improved prospects for its trading unit and gas-fired power plants.

The group previously expected earnings before interest, tax, depreciation and amortisation to hit the lower end of an adjusted range of 5.2 billion to 5.8 billion euros, and an adjusted net profit of 1.9 billion to 2.4 billion euros in 2024.

RWE’s nine-month adjusted EBITDA fell 30% to 3.98 billion euros, but came in above the 3.87 billion euros expected in a poll provided by the company on Oct. 29.

($1 = 0.9424 euros)

(Reporting by Christoph Steitz in Munich, Kanjyik Ghosh in Bengaluru and Vera Eckert in Frankfurt; Editing by Arun Koyyur, Jamie Freed, Shri Navaratnam and Jan Harvey)