ESSEN, Germany, March 14 RWE has sold
the bulk of its 2018 and 2019 power generation at prices below
current wholesale market levels, which bodes ill for power
generation margins in coming years, data from the German utility
showed in Tuesday's earnings report for
* For 2018 it hedged more than 90 percent of German power
volumes at 27 euros ($28.73) per megawatt hour and for 2019 more
than 70 percent at about 25 euros/MWh, RWE said.
* By comparison, German calendar year 2018 baseload power in
the wholesale market traded on Tuesday at 29.80 euros
and 2019 power was at 27.75 euros, Thomson Reuters
* Wholesale energy traders track utilities' hedging ratios
and prices to assess the size of future volumes already tied up
with counterparties such as traders, banks and consumers, and
the value of forward production.
* The RWE hedges apply to nuclear and brown coal-generated
electricity produced in RWE's core German market. RWE also
produces electricity in hard coal and gas-fired power stations
in Germany and other EU countries.
* Electricity delivered last year from RWE's German plants
fetched 35 euros/MWh on average while the bulk of 2017 sales
were made in the past at 31 euros.
* RWE's conventional power generation unit last year
benefited from plant closure and efficiency gains, which raised
its adjusted earnings before interest and tax (EBIT) by 5
percent year on year to 627 million euros, it earnings report
* It has projected significantly lower earnings at the unit
this year, blaming lower realised generation margins.
* European power prices have been recovering slightly for
the past six months after supplies tightened overall as France
closed larger than expected numbers of nuclear reactors for
additional safety checks in the winter.
* Prior to that, prices had been in an almost continuous
downtrend since 2011.
* The French crisis has brought the market into
backwardation until 2019 but prices from 2020 onwards have been
lifted by ongoing plant closures.
* Chief Financial Officer Markus Krebber said in a press
conference that RWE could still benefit from higher prices for
the 30 percent of 2019 volumes that are unsold.
* "At this level, the plants are at break-even, but the
position is not fully closed, so we can participate in further
recovery," he said.
($1 = 0.9398 euros)
(Reporting by Vera Eckert; Editing by David Goodman)