RWE sheds old business model, embraces new energy reality

By Karel Beckman on 22 October 2013

RWE, Germany’s largest power producer, has decided to radically depart from its traditional business model based on large-scale thermal power production. Henceforth, the company will “create value by leading the transition to the future energy world” – a move revealed by confidential documents, discussed at a recent meeting of RWE’s Supervisory Board in Warsaw, and witnessed by Energy Post.

The new strategy was decided on at a meeting of RWE’s Supervisory Board in Warsaw on 19 and 20 September. It will be discussed more broadly within the company in video conferences scheduled for 29 October. RWE is one of Europe’s biggest emitter of greenhouse gases.

The “Strategic Roadmap” discussed in Warsaw and a strategic document called “RWE’s Corporate Story” make it clear that the company’s leadership has accepted that RWE, which has traditionally relieved heavily on its coal-fired and nuclear power production business, has decided that it needs to radically change course it if wants to survive in the new energy world created by Germany’s and the EU’s Energiewende.

“The massive erosion of wholesale prices caused by the growth of German photovoltaics constitutes a serious problem for RWE which may even threaten the company’s survival”, states the Strategic Roadmap.

At the same time, RWE’s management has decided that the company will not be able to play a leading role in the  new growth sector of decentralized, subsidized power production, which it says will remain “the only growth segment in the European power generation market” for the foreseeable future. “In a low-interest environment, it will not be possible for RWE to generate sufficient return within this subsidised industry. Our cost of capital will not be competitive against funding from private and institutional equity investors”, says the strategic document.