RWE suspends dividend payouts after annual loss

RWE, Germany's second-biggest power supplier, said Wednesday it will partially suspend dividend payouts after running up a loss in 2015 as a result of collapsing wholesale prices and weak profitability in the conventional power generation.
The announcement sent RWE shares into a nosedive on the Frankfurt stock exchange, where they were the biggest losers, plunging 12.4 percent to 10.34 euros while the DAX 30 index climbed 2.7 percent. Germany's power suppliers have been hit in recent years by government plans to eliminate nuclear power by the next decade and champion a so-called "energy transition" away from fossil fuels such as coal towards renewable energy sources such as the wind and the sun.
Power utilities have complained that the cost of having to close down their nuclear power plants and the heavy subsidies afforded to renewable energy have pushed them deeply into the red. RWE said in a statement it booked a net loss of 200 million euros ($223 million) in 2015 compared with net profit of 1.7 billion euros a year earlier.
The loss was due to a writedown of 2.1 billion euros on its power plants in Germany and Britain, RWE explained. "The continued collapse of wholesale electricity prices came to bear, leading to an erosion of power plant margins," RWE said in a statement. "The prospects in the conventional power generation business have worsened further."
Adjusted for one-off effects, net profit amounted to 1.1 billion euros, at the lower end of forecasts, and underlying or operating profit totalled 3.89 billion euros, RWE said. In the wake of the "unusually weak" bottom-line earnings, the management board "has decided to propose ... a suspension of the dividend payment to holders of common shares for fiscal 2015," RWE said.
Holders of preferred shares would still receive a payout of 0.13 euros per share. "The backdrop is the recent dramatic deterioration of the earnings prospects of conventional power generation," RWE said. "In light of the current economic prospects of conventional power generation, we reached a decision concerning the dividend today that did not come easily to us. We know that we might disappoint many shareholders. However, it is necessary in order to strengthen our company," said chief executive Peter Terium.