RWE gloomy for 2016 outlook after profits fall in 2015

 German power giant RWE on Tuesday confirmed its forecast for a further decline in profits this year as Germany's transition away from conventional power continues to squeeze margins and the group announced an overhaul of its British operations.

"The company is planning new steps to increase its operating effectiveness, focusing on conventional power generation and the UK supply business, which it intends to comprehensively restructure," RWE said in a statement.

It did not reveal the exact details of the overhaul, but said that "measures to restructure the UK supply business have begun, and RWE expects further burdens in this area in 2016."

The group's British unit npower announced separately it would axe 2,400 jobs after posting an annual loss on fierce competition and sliding sales.

Npower, which employs a total workforce of 11,500, said it suffered an "extremely disappointing" performance and would shed "around" 2,400 jobs by 2018 in a new cost-cutting drive.

At group level, RWE largely confirmed preliminary 2015 results released last month.

Underlying or operating profit fell by four percent to 3.8 billion euros ($4.2 billion) and adjusted net profit was down 12 percent at 1.1 billion euros.
But the unadjusted bottom-line loss amounted to 170 million euros.

RWE, with its sprawling portfolio of coal-fired power stations all across Europe, is feeling the pinch from the collapse in wholesale electricity prices and increased competition from suppliers of energy from renewable sources.

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 has been repeatedly compelled to writedown the value of its coal-fired plants and took a 2.1-billion-euro charge again last year.

Looking ahead to the current year, forecast a "considerable decline" in profits, with operating profit set to drop to 2.8-3.1 billion euros and adjusted net profit to 500-700 million euros.

"One principal reason is the price-induced decline in margins in conventional power generation, which efficiency-enhancement measures will only partly offset," RWE said.

"Despite the difficult economic environment, both net debt and headcount are expected to remain constant at a group level," it added.

In December, RWE announced plans to spin off its renewables, grids and retail operations and take the unit public.

Bigger rival E.ON is similarly splitting its conventional and renewable energies operations into separate entities.