RWE eyes MENA market amid falling profits

 Germany’s largest power producer RWE AG plans to expand its business outside Europe to offset falling earnings at its conventional power generation unit, adding the Middle East, North Africa and Turkey as future profit drivers, said its chief executive Peter Terium.
While ruling out large acquisitions to enter these markets, RWE said it would look at assets that may be put up for sale. It is also looking into solar and wind power projects in Egypt, according to a Reuters report.
Speaking to journalists in Dubai, Terium pointed out the potential currently offered by the rising power demand in the region adding that RWE would consider buying any assets on sale by Enerjisa, a Turkish joint venture of E.ON and Sabanci Holding.
“The MENA region can become a perfect profit driver in the future. We want to be active across the entire value chain,” said Terium.
The company might consider selling off a stake to an investor from Abu Dhabi sometime in the future, if RWE’s share price recovers sufficiently, he said. In September, the company had ruled out such a move, according to WSJ.
RWE operates a consulting joint venture, RWE Middle East, with the Dubai Electricity and Water Authority. In April, RWE said the venture was advising the government of Dubai on its integrated energy strategy, and was also advising a leading energy company in Abu Dhabi on a smart grid strategy.
At home, Mr. Terium indicated that the company could be forced to consider splitting its conventional energy operations from renewable energy, due to low power prices, similar to its German peer E.ON SE.
RWE is Germany’s worst-performing large-cap company this year, and is struggling with nearly 26 billion euros ($28.5 bn) of net debt. It has slashed costs and jobs in an attempt to end years of falling profits.
German wholesale power prices have nearly halved since early 2012 and currently trade at 29.35 euros per MWh, squeezing margins at the group’s power plants to the point where it becomes more economical to simply shut them down.
Larger rival E.ON last year decided it would spin off its ailing gas- and coal-fired power plants into a separate unit as a result, a move that RWE Chief Executive Peter Terium does not rule out if prices slide further.
“The case X has not yet occurred but at power prices of 28 euros ($31) per megawatt hour (MWh) things are slowly getting exciting,” he said. “It’s becoming harder to just cut more costs.”
The pressure on Germany’s utilities has accelerated amid concerns over their ability to come up with the funding to pay for shutting down the country’s nuclear plants, which will be completed by 2022.