By Nicholas Comfort
Feb. 26 (Bloomberg) -- RWE AG, Germany’s second-largest utility, posted a fourth-quarter profit after starting two reactors following repairs, and raised its earnings outlook.
Net income was 347 million euros ($441 million), versus a 167 million-euro loss a year earlier, Bloomberg calculations show. Bloomberg subtracted nine-month results from full-year figures released today by RWE. Company spokesman Harald Fletcher declined to comment on the calculation. Profit missed the 421 million-euro median estimate of six analysts surveyed by Bloomberg.
RWE started two nuclear reactors, which are cheaper to run than coal- or gas-fired plants, boosting profit even as a recession in the euro region cut demand from industry. Profit through 2012 will grow faster than previously forecast as long as RWE can sell advance contracts for German electricity at an average 60 euros a megawatt-hour, it said.
“The mid-term outlook is pretty upbeat,” Bernhard Jeggle, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, said today by telephone. “That’s surprising. The forecast for 2009 is significantly below consensus.”
Operating profit and earnings before interest, tax, depreciation and amortization as well as recurrent net income will all be on par with 2008, Essen-based RWE said. Sales rose 18 percent in the fourth quarter to 14.5 billion euros, and will be higher in 2009 than in the 12 months through December, it said.
Shares Drop
RWE fell 88 cents, or 1.7 percent, to 51.75 euros in Frankfurt trading at 9:21 a.m. local time, valuing the company at 28.8 billion euros.
Spot prices for power in Germany, Europe’s largest energy market, touched record highs last year as fuel costs rose. They averaged 66 euros in the nine months through September and have dropped 52 percent since then, according to broker GFI Group Inc.
While RWE may earn an additional 900 million euros selling power at about 64 euros a megawatt-hour in 2009, up from 58 euros last year, profit will be sapped by pricier fuel, Jeggle said.
The electricity prices RWE can charge will probably fall below 60 euros in 2011 and 2012, making the mid-term guidance harder to reach, according to the analyst, who recommends investors “hold” shares in the utility.
RWE shares fell 34 percent in last year. That’s less than the 41 percent drop of larger, Dusseldorf-based competitor E.ON AG and the 38 percent decline of the Dow Jones Stoxx Utilities Index, which includes both companies.
Biblis Halts
RWE’s Biblis A and B atomic reactors halted in 2006 to repair screw anchors that didn’t meet regulator specifications. The two plants, which have a combined capacity of more than 2,000 megawatts, were both on line in the fourth quarter.
That meant the utility could ramp up the share of nuclear power it supplies clients and buy fewer carbon-dioxide emission permits. Unlike production at RWE’s lignite-fired plants, atomic generation is almost emission-free.
Operating profit will grow 5 to 10 percent a year through 2012, up from a previous 5 percent goal, based on an average forward power price of 60 euros a megawatt-hour, the company said in the statement. That forecast doesn’t take into account RWE’s takeover of Essent NV, announced last month. Recurrent net income, which RWE defines as net income before one-time items such as charges and writedowns on fuel hedging derivatives, will gain 10 percent on average through 2012.
Gas Price Cut
RWE will cut natural-gas tariffs for its customers by 12 percent from April 1. Including a January reduction, that will trim prices by 18 percent, according to the statement. The heating fuel is pegged to crude oil, which has fallen more than $100 since a record high of $147.27 a barrel in July.
The dividend payout for 2008 will jump 43 percent to 4.50 euros a share, pending stockholders’ approval at their annual meeting in April, the company said Feb. 24.
RWE plans to cut costs by 450 million euros by the end of this year and will trim 1.2 billion euros of expenses from operating profit through 2012, it said in the statement.
Full-year profit fell 4 percent as RWE took a charge related to its U.S. unit American Water Works Co., the company said today.
Net income in the 12 months through December was 2.56 billion euros, down from 2.67 billion euros a year earlier. Full- year sales rose 15 percent to 48.95 billion euros.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
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