RWE caves to investor pressure over green investments after Trump victory

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RWE announced a share buy-back programme as the German energy giant caved to mounting investor pressure over its plans to invest €55bn in renewables in the wake of the re-election of Donald Trump.

The Essen-based company, which has large investments in the US, said it would purchase shares up to a volume of €1.5bn over a period of 18 months to boost its lagging share price, and slow the pace of capital expenditure in the years ahead.

The former fossil fuel giant, which is under pressure from some investors over what they see as a failure to deliver shareholder value, said that the re-election of Donald Trump had also influenced its plans.

“Given the results of the US elections, the risks for offshore wind projects have increased,” the company said, as it announced it would reduce net investments in 2025-26 to €7bn, down from €10bn in 2024.

Chief financial officer Michael Müller said that the investment delays could cause the company’s plans to invest €55bn in renewables by 2030 to “slip back”. He said: “There will probably be less [investment] in that period. But we will have to wait and see how things develop in the future.”

RWE also cited delays to Europe’s plans to roll out green hydrogen as a reason to slow capital expenditure.

“We apply strict return requirements to the investment of our funds and regularly review our capital allocation,” chief executive Markus Krebber said. “If the risk-return profile in certain areas changes temporarily, we reallocate the capital earmarked for this purpose accordingly.”

The news was welcomed by investors and analysts who had for months questioned RWE’s strategy of using its strong cash flow to plough billions into renewables with uncertain returns. The company’s valuation, with a market cap of about €24bn, has lagged behind peers such as Denmark’s Ørsted.

“RWE has finally succumbed to the call of many shareholders and analysts for a more prudent capital allocation,” said Benedikt Kormaier of Enkraft Capital, which owns a small stake in the company worth less than 0.2 per cent of the company, and has also been active in applying pressure to company management. 

“The risks of RWE’s aggressive investment strategy in the US and on the hydrogen side have started to materialise. It is only prudent that the investment programme is now prudently reviewed and scaled back and capital distribution to shareholders is increased,” he added.

Deepa Venkateswaran, an analyst at Bernstein who has been critical of RWE’s strategy, said: “Management is finally listening to investors.”

She added: “Today’s announcements and especially the buyback could prove to be a turning point for rebuilding confidence in management.”

RWE has ploughed money into renewables projects including large offshore wind developments in Britain, Denmark, Germany and the Netherlands. Last year it spent close to $7bn acquiring the Con Edison Clean Energy Business, which operates a portfolio of solar and wind projects in the US. 

RWE reported adjusted earnings before interest, taxes, depreciation and amortisation of €4bn in the first nine months of the year — down from €5.7bn in the same period in 2023 despite what it said was a “significant increase” in earnings from the wind and solar segments.

But it said that earnings expectations for the group for the full year had improved and would now hit the middle range of its previous guidance. It confirmed its dividend target of €1.10 per share.