RWE buys back $1.6 billion in shares as the outlook for US offshore wind and hydrogen worsens

RWE, Germany’s largest utility, announced on Tuesday that it would purchase up to 1,5 billion euros ($1.6billion) in shares. The company cited weakening prospects in Europe for hydrogen and offshore wind, in response to Donald Trump’s election win.

RWE has also bowed to investor pressure by launching a buyback that will begin in the fourth quarter of this year and last for 18 months. This is due to the fact that clean energy projects are not generating the returns they should.

"We have strict requirements for the return on our investments and we review our capital allocation regularly." We reallocate capital to certain areas if the risk-return profiles change temporarily.

RWE stated that the risks associated with offshore wind have increased since Trump was elected as the next U.S. President. Trump is an outspoken opponent of the technology. The company said its project on the east coast of the United States could be delayed because it lacks permits.

The company warned that the planned ramp-up of hydrogen in Europe is not proceeding as planned. This could delay RWE’s efforts to increase electrolyser capacities, echoing similar comments made by Uniper, a smaller competitor, last week.

RWE's decision reflects wider fears about what Trump's return as president could mean for investments in clean energy in the United States. Parts of the current U.S. Presidency Joe Biden’s clean technology agenda are expected to be scrapped.

Benedikt Komaier, of the energy activist fund Enkraft which has been calling for buybacks for years, said that RWE had finally listened to shareholders and analysts who wanted a more conservative capital allocation.

In an email, he stated that "the risks of RWE’s aggressive investment strategies in the US and the hydrogen side begin to materialize."

RWE also gave a slightly optimistic outlook for 2024. It said it expected to reach the midpoint in the target ranges of adjusted core profit (EBITDA), and adjusted net profits, citing better performances at its trading division and gas-fired electricity plants.

Previously, the group had expected to achieve a lower end of the adjusted EBITDA range between 5.2 billion and 5.8 billion euro in 2024. It also anticipated a net profit adjusted of 1.9 to 2.4 billion euro. RWE reported Tuesday that its nine-month adjusted EBITDA had fallen 30% to 3,98 billion euros. (1 dollar = 0.9415 euro) (Reporting and editing by Arun K. Freed and Jamie Freed in Bengalur; and Christoph Steitz, Munich)

(source: Reuters)