RWE Open to Splitting Group if Crisis Worsens

Keeps option open to explore split, no current need; crisis is far from over for utilities.

Germany's largest power producer RWE will explore a split of its businesses if the sector's crisis intensifies, Chief Executive Peter Terium said, keeping open the option of a drastic overhaul similar to rival E.ON.

Germany's utilities have seen their profits and share prices tumble as they grapple with a restructuring of the energy sector that has promoted solar and wind generation at the expense of their gas-fired power stations.

"We want our company, RWE, to remain active in all parts of the value chain," he told shareholders at the group's annual general meeting on Thursday.

"But we reserve the right to examine a split if market conditions and regulatory conditions should deteriorate further to our disadvantage," he added.

E.ON in late November took the most drastic step so far by a European utility as a result of the crisis, announcing it would spin off its power generation, energy trading and oil and gas business into a new entity next year, while keeping power grids, renewables and energy services.

"The crisis is far from over," 51-year old Terium said. "Times will get even harder."

As a result of the energy industry's problems, the price of RWE shares has slumped by more than three quarters since 2007, destroying nearly 40 billion euros ($43 billion) in market value.

Having accumulated a 31 billion euro debt pile during the industry's heyday, RWE has worked hard to reduce its leverage, shedding assets such as its oil and gas unit DEA as well as talking with outside investors about potential cooperations.

The crisis has also triggered fears over whether Germany's utilities will be able to survive the fundamental shift that is taking place in the power sector, but Terium said there was no risk of an insolvency in the short term.

He warned that a coal levy, proposed by Germany's Energy Minister Sigmar Gabriel to lower the country's CO2 emissions, would lead to the immediate closure of the majority of the group's lignite-fired plants.

Lignite is RWE's most important energy source, accounting for about 37 percent of its power generation last year.

Terium confirmed that RWE, which supplies 16 million customers with power, was in talks with a Gulf investor about several forms of cooperation, adding no deal had been signed yet.

By Christoph Steitz and Tom Käckenhoff