RWE AG (RWEOY) Q1 2025 Earnings – Full Coverage

Thanks Thomas. Good afternoon from my side. RWE had a solid start into 2025. Adjusted EBITDA stood at 1.3 billion euros and adjusted net income at 500 million euros, despite weak wind conditions in the first quarter. We confirmed the guidance for the full year. Our 1.5 billion share buyback program is making good progress; the first 500 million tranche will be completed by the end of the month, followed by the second tranche, and the full program will be completed by May 2026. We are also well underway with offshore portfolio optimization. We successfully sold down a 49% equity stake in our 1.6 GW Norther cluster and 1.1 GW Thor offshore project at an attractive valuation for approximately 1.4 billion euros. The transaction significantly reduces our share in the project's net cash investments by about 4 billion euros. Let's now take a closer look at the construction program. Our offshore wind projects under construction are all well underway. The 1.44 GW Sofia project in the UK is on track for commissioning in 2026; 49 of 100 foundations and 12 turbines already installed. In Denmark, we just started offshore construction at our 1.1 GW project. Our 1.6 GW Norther cluster in the German North Sea will be commissioned in 2027 and 2029. For onshore wind and solar, we commissioned 500 MW in Q1 2025. More than 95% of offtake is secured. In the US, we have largely mitigated supply chain risk; tariff risk is not material. We are also forging ahead with projects in Europe and Australia. In flexible generation, we fully commissioned one of the largest battery storage systems in Germany at 220 MW. The new German government wants to incentivize new gas plants; we are ready to construct at least 3 GW if conditions are right. Now on Q1 2025 financials: Despite weak wind, we achieved solid earnings. Offshore wind adjusted EBITDA was 380 million, below last year due to wind and lower hedge prices. Onshore wind and solar recorded EBITDA of 496 million, benefiting from capacity additions and higher hedge prices. Flexible generation EBITDA was 376 million, in line with normalized prices. Supply and trading had a weak start at 50 million. Other consolidation was 400 million. Total adjusted EBITDA came in at 1.3 billion. Adjusted net income was 500 million, adjusted EPS 0.7 euros. Adjusted operating cash flow was minus 1.15 billion due to seasonal effects. Net debt increased to 15.9 billion due to investments and seasonal cash flow. We expect net debt at year-end to be lower than Q1 and slightly below our three times leverage target for 2025. We confirm the outlook: adjusted EBITDA between 4.55 and 5.15 billion, adjusted net income 1.3 to 1.8 billion, adjusted EPS 1.8 to 2.5 euros, dividend target 1.2 euros per share. With that, let me hand back to Thomas.

All right. Yeah. Alberta, let's start with net debt. I stated clearly that Q1 net debt is marked by a seasonal pattern that will revert over the course of the year. Obviously there will be the offset of operating cash flow from the earnings and then the investments. But as I said, year-end number should be lower than what we currently see and we do expect it also to be below the three times targets based on net debt. Second question on impairment: we don't see an impairment need on our New York Bight asset. The asset does have a leasing right until 2060 and we do see clearly the need for offshore wind for that region in the US, and that's why we see the assets still as being valuable. We mentioned in the full-year numbers that we have significantly reduced our spending to the minimum required to keep the option of the lease, and we don't have any commitments going further. So it's really restricted to the current book value which we still see as valuable. Then your question on the full year: we don't comment on performance of the current quarter, but you will have seen that at least April wind in Europe was again not very strong, but please bear in mind that the important quarters are Q1 and Q4. So April is typically not so significant for the overall numbers. And that is only for Europe, not the US. If you look at the entire year, we confirmed our guidance, and I mentioned that when we gave the guidance, it already incorporated the lower wind years we saw at the point in time when we gave the guidance which was mid of March.

Look, trading, I can't tell you anything about the running quarter. That's what we never comment on.

Yeah, Peter, let's start with the latter one. First, let's confirm we stick to our guidance. So that's still the range we see. As we said, we also had an unavailability of one asset in Q1 which also led to additional negative part in the first quarter. But overall we stick to the guidance. Secondly, please be reminded that when we look at the segment, we look at each individual asset and optimize the asset and also make sure that they are cash positive. So if an asset is cash negative, we don't operate that. And if you look at the lignite, it's clearly the case the assets are cash positive. Yet we are already preparing for the later recultivation. So much of the cash flow is already spent into the mining system. If you look at the overall system, over time costs will come down. So you should see an improvement in the cost basis going forward. Plus we are also continuously optimizing the assets to improve the situation. So clear message: we don't run unprofitable and cash negative assets and we are continuously optimizing also that segment and stick to the guidance. Next one on zonal pricing. Let's start with the UK. You know that apart from one company everybody in the UK in the business is opposing zonal pricing because clearly what you see in the current situation we do need significant investments into green technologies and an introduction of zonal prices just adds additional uncertainty which clearly doesn't improve the investment environment. And the latest developments in offshore also underpin that. So I hope for the UK government to properly reflect that if they judge on zonal pricing. The other aspect is that it introduces uncertainty, that's why we don't like it. What the final impact would be is not so clear because our assets are actually better positioned as they are in the south. But from our point of view, we don't want to see that uncertainty. Rather stick to the current setup. On Germany, similar topic. You saw that this investigation was brought forward. There were clear comments from the German TSOs opposing that review because first of all the benefit that was calculated was fairly small yet the downsides were not fully incorporated, like lack of liquidity or lack of investment certainty but also the impact it would have on industry or potential future PPAs. So that needs to be considered. Especially given the advantage was only minor, there is not a clear recommendation out of that investigation for a zonal split. Secondly, the investigation also didn't incorporate all the grid buildout that is already planned or ongoing. So if that would be considered, we foresee the number would have been different. That is also leading to our recommendation: Germany needs to focus on getting the grid buildout done, similar in UK, because that ultimately will solve this issue of redispatch from the north to the south. Finally, you already mentioned that in the German coalition agreement they clearly stated they are in favor of one zone. So my closing remark would be I don't expect any changes here.

On the zonal pricing, I mean, it's very early days, so that was just an investigation or a report, so I don't see any development here. So it's too early to judge if that depends on individual countries. So actually I wouldn't put too much emphasis on that topic because clearly Germany has currently other topics to focus on than zonal prices. And that brings me actually to the CCGT topic. Look, the government is just in place with the economic ministry Katarina Raja who previously worked for AON. We clearly have a very experienced secretary in the ministry who knows the industry and has a good understanding, and one of her three priorities she has put forward is to bring forward the gas efforts, which we see as very promising. Now the next step obviously will be to engage with Brussels to find a solution that is pragmatic and quick, but honestly we are pretty confident that this should not go in the right direction given also that she has put that on her priority. I mean, we are prepared as I said also in my speech to go ahead, and then we need to see which direction it's going.

So first of all, I don't know what Luxembourg says on zonal pricing, but from my point of view, we are not yet there that there are kind of decisions needed by individual member states. Yeah, so we are in a very early stage where just an investigation was done. Yeah. But happy if there are more detailed questions to follow up on that topic with the team. The other one on the timeline: look, what is the underlying assumption of the CCGT or of the gas buildout is that we can facilitate the further buildout of renewables and the phase out of coal and there's a due date which is 2030. And if you want to have additional capacity by 2030, you should also have the first auctions or FIDs end of the year latest beginning of next year. So therefore, I'm confident that we'll see something in the course of the year. But we need now to observe what happens in the next months to come.

Okay, let's start with the Inflation Reduction Act. You saw that the Ways and Means Committee of the House of Representatives put forward a proposal. It's a pretty long proposal. So we are currently analyzing that in detail, and you also know that this is just a first proposal. So there will be a longer legislative process which needs to follow. So for me, it's too early to already conclude what that really means for our strategy. But looking into the draft, it's actually promising. So I'm confident at least what we read in the draft that this should not impact our strategy or our way forward in the near term. But as I said, we need to see, and therefore it's too early to have any implication on capital allocation. So we need to see how that now evolves. And therefore we also stick to our strategy which is the investment program but clearly with more scrutiny. So increased return expectations but also more scrutiny on the individual project, which means we only go ahead if safe harboring is in place, if tariffs are mitigated, if all federal permits are there, and we have also contracted the offtake. Next question was on Amprion. We said we are in the process of looking at alternatives to finance the capex program going forward, and we'll tell you once we have taken a decision, and that's not yet done. And on the regulation, no, that doesn't put the process on hold. So the process around Amprion is independent of any governmental announcements or net zero announcements.

Okay, let's start with trading. No structural changes and therefore also no read across for the remainder of the year. That's why we stick to the guidance we have. Second one on capex for CCGTs. If you go back to our Capital Markets Day, we said that we have roughly 3 billion euros kind of earmarked for CCGTs or gas assets in Germany. But there is flexibility in capital allocation. For me the important piece is how does the framework look like. We are clearly developing more assets than just the 3 GW, and then we need to see how the auction goes, how it's designed, how it goes, and then to move forward. But to be clear, the strict investment criteria we applied for renewables obviously also apply for the German gas assets.

I mean, I can say that at least the contracts we have already secured are more in line with the numbers you said. And then it depends on when we do new projects, which type of projects are those.

Yeah, I mean I can't give you the complete numbers how we calculated exactly our guidance. But if you go back, we published the guidance mid of March and since the guidance was part of our annual report, you can assume that the auditor had to look at the numbers so that we kind of defined the guidance internally end of February and that is also the time that is fully incorporated. So January and February low winds are fully reflected in the guidance and the rest is then assumed normalized earnings or normalized weather. Bear in mind, we don't know what the summer and especially Q4 is bringing. Also bear in mind that compared to last year, last year's Q1 was extremely strong. So the relative comparison is not only low winds but especially low winds compared to a very strong Q1 last year. And therefore when I look into the full year, I still assume average winds for the remainder of the year. And therefore we are confident with the guidance we have given. On the offshore industry in Europe, look, we do see obviously an easing in the industry. On the one hand, we hear from some of our competitors, especially some of the oil majors, that they are not so bullish anymore about the industry, which should lead to some easing on their side. And also some other competitors at least vocally voice that they rather shift CapEx in other areas of their business, which also should give some easing of the offshore industry. Plus, you saw a big competitor of us withdrawing from a huge project in the UK. For me, that is a signal clearly that there is an easing on the demand for offshore components. So I would foresee an easing of the supply chain. I think it also will help to ease financing and also in the sell-down market you will also see less projects. So honestly we believe that our strategy to also be more careful with our investments, keep the dry powder dry, is exactly the right strategy in the current environment. And final comment: if you look at the UK, if the UK government wants to achieve their targets, it's clear that the next auction needs to be designed in a way that enables sufficient capacity to be contracted, which from my point of view is also a positive signal for the offshore industry in the UK.

Yeah, I can take that. So in the offshore business, compared to expectations or to normalized weather in the offshore segment, it was around 150 million euros below expectations.

Yeah, Ollie, let's start with the first one. Look, to be very transparent, there is obviously a clear push from some of our investors for share buybacks. But I have to tell you, there's also a push from other shareholders, and it's not just the ones you mentioned but also others that clearly state if we do have profitable investments, we should consider profitable investments. So it's a kind of a mixed picture. But what for me is more important is what we stated at the full year numbers. In the end, it is a matter of comparing the different opportunities and capital allocation. So if we see attractive projects and also an attractive environment that gives us more certainty that would be beneficial for investing more. The other one is obviously the share price. The higher the share price, the less you're attuned to buying back shares and vice versa. And that's why we said we'll consider that when we take the decision at the beginning of 2026. So what is the environment in the US by then? What is the environment around gas assets in Germany? What are we seeing as actual returns on the projects that we can take investment decisions on? And where is the share price? And then based on that, take a good decision how to take it forward. Next question on AR7. I can't comment on what the UK government will do now, but it's very clear: if they want to achieve their 2030 targets, we clearly need more projects to be successful in this auction. Bear in mind, AR5 no asset cleared, AR6 basically the Hornsea 3 cleared which was already in the building. So there were just two additional assets who cleared and one of them, 2.4 GW, is now not built. So it's clear that more capacity will be needed. But it's ultimately up to the UK government now to decide how to go forward. Clearly we are there with our projects and also willing to build, not only to bid but also to build those assets.

Look, I would put it the other way around. It's clear that there needs to be either an indemnification or clarity on the zonal pricing before anybody would bid into AR7. So that's also what we clearly state towards the UK government.

Let's start with the zonal pricing. Honestly, I can't judge. That is a purely political decision. You saw that the whole industry except one participant is pushing against that. The arguments we put forward are very clear. We need to observe what happens. But as I said, the impact on AR7, we are confident that this will be mitigated one way or the other. And the other topic is in principle if it would happen, the impact on our portfolio would by my assessment rather be or there's a good likelihood that this is rather positive. But as I said, we don't appreciate it going forward because it just adds uncertainty that is clearly not needed in an environment where you want to have investments. On the US budget draft, the topic of foreign entity of concern is a passage in the draft that is not very clear, so we're still in the process of assessing what it really means, also in collaboration with the association. But our current view is that it doesn't have an impact.

Yeah, let's start with the last question. Clearly, whatever we do on Amprion, if that adds additional funding to our balance sheet, that is something we would consider in the overall capital allocation. But as I said, we have a current share buyback program running until Q2 2026 and we will decide on that program at the beginning of next year, incorporating all the sources and uses available at that point in time. Your question around the proposal on the feed-in tariffs in Germany. Look, first of all, this was a first draft that is out for consultation. We do appreciate that as a start into a dialogue. You may have seen that Marcus Krebber and then Neil Bilbalm, they both published a short document ahead of the German election on topics to be addressed in Germany. They also stated the topic that the grid fee or that we need to work on more flexibilization of demand. And therefore, looking at the grid fee system and also introducing some capacity payments is leading in the right direction because you do incentivize more flexible behavior. So it is the right direction. On the exact proposals, we do have some different opinions on some of them. But as I said, it's a start into a discussion, and in the end, I think it is absolutely appropriate that if we want to make the energy transition happen, we now also need to address the topic of affordability, and that includes all components including grid fees.

No.

Yes.

Yeah, as a little longer answer to your second question. Look, for me it's ultimately a question of sentiment in Germany. So I do have the hope that a good program and also a good government changes the overall investment sentiment in Germany. And that this then also triggers investments and growth again. And it's clear that any growth we see in Germany will help to boost demand. I mean, put it the other way around, we saw a significant reduction in demand on the back of the energy crisis that hasn't recovered. So there is a good chance that if the program really helps to boost the economy, that will lead to economic growth and also to demand growth. And clearly, given that German industry is very much focused on decarbonization, that also will help to boost the demand for green power in Germany. So long answer but short yes.

Yeah, Peter, you put it right. It was just one of those quarters. I guess we are all very spoiled by a clear outperformance in quite a lot of previous quarters. So there is nothing specific as I already answered to Deepak's question, and also no structural changes. It's just a poor quarter.

Yeah, thanks J for the question. This is a very important one. It's clear that we are not just talking about existing capacity and new capacity, but we also need to think about a proper remuneration for existing capacity with more renewables coming into the grid. You see UK has that in place, Belgium has introduced it. So that's definitely something to look at. To be clear, when we talk to politicians, we say the topic that is urgently short-term needed is the new build of capacity. That's why we recommend in the first step focus on the new capacity. That's why we also appreciate the target to incentivize 20 GW until 2030. But we are also clearly stating that's the one thing. So what you need to do ideally in parallel or if not shortly after, start consultation on a concept for a proper capacity market in Germany. We know that this will be probably a more lengthy process and that's why also this one is needed to be kicked off very shortly. But again, I think the first one is let's get it sorted that we have the new capacity and then the second topic needs to be addressed in the second step, but both are definitely needed. And clearly if you look at our business model, look at the UK, that does provide a good opportunity for our flex trend business.