German utility RWE expects profits to fall about 30 per cent this year because of a nuclear power plant tax and stagnating power prices.
Bloomberg reports that German Chancellor Angela Merkel wants to raise an annual EUR2.3bn ($3.2bn) in the six years through 2016 with a tax on the country’s nuclear stations to help plug the budget deficit. RWE, which operates four German reactors as well as generators that burn coal and gas, also faces slowing earnings as fuel costs rise faster than wholesale power prices in the region.
RWE said it plans to reduce debt by selling assets to raise as much as EUR8bn by 2013 and will cut investments through 2013 by EUR3bn to EUR18bn. The company will extend its cost-cutting program by EUR200m and now expects the measures to increase operating profit by EUR1.4bnn 2012 from the 2006 level.
Adjusted earnings before interest, tax, depreciation and amortization will fall about 15 per cent this year from EUR3bnn 2010, while operating profit will drop about 20 per cent from EUR7.68bn, the company said.
RWE bought Netherlands-based Essent in September 2009 for about EUR7.3bn, gaining EUR2.6m customers and as well as renewable energy projects.
According to Bloomberg, the German utility was able to increase earnings during the global slump because of electricity supply contracts that were set before a plunge in energy use. German electricity prices, a European benchmark, have since failed to track gains in the cost of fossil fuels, reducing the profits of coal fired generators.
Utilities in the European Union will have to pay for all the CO2 their power stations emit starting in 2013 as the bloc implements rules to cut greenhouse gas output. RWE said today that the German nuclear tax will cut earnings by an average EUR600m to EUR700m a year starting in 2011.
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