European Market Report
Page 2 of 12
In reporting its latest results RWE produced an improved performance with operating results up 21% on the back of its core businesses delivering improved performance. In electricity, the German market delivered improvements thanks to cost reductions and higher wholesale prices - German wholesale power prices had fallen sharply in recent years. In gas the key changes have been at a strategic level with the recent acquisitions of both the Czech gas industry and Highland Energy, which is active in the upstream sector. RWE also owns 75% of Thyssengas, which is one of Germany's largest long-distance gas companies but after Ruhrgas, which RWE's rival, E.ON, is trying to purchase. In water, Thames Water helped to deliver a 20% increase in RWE's profits and when the acquisition of American Water Works is completed RWE will become the third largest water company in the world. The main bulk of cost-reduction potential is seen to be in the electricity sector - estimated at 90% of the total by RWE. Again this is an area where there has been plenty of experience in the UK! It may be worth noting that RWE is an enormous company despite the downsizing and focussing that it has undertaken in recent years. In the last year it reduced its workforce by some 4% but it still had 156,000 employees. It has made what can only be described as an enlightening statement for a company operating in competitive markets. It states quite clearly that "as in prior years, the company trained far more people than necessary to satisfy its own needs". Presumably it is a training specialist - or there may need to be some further re-focussing of its activities!
