FT: German utilities: power down

Some questions are tougher than others. Red or white? Still or sparkling? United or City? RWE or Eon? When it comes to the German utilities, the answer is invariably “neither, thanks”. Never mind the colossal loss of value over five years; the more worrying trend in the year to date is the growing divergence in the stock market performance of the German groups – RWE down a third, Eon down 15 per cent – compared with, say, France’s EDF, which is up nearly 60 per cent.

Second-quarter results this week from RWE and Eon will shed some light on why this is happening. Their operating income could be down at least 10 per cent as a result of lower electricity prices, continued restructuring at both companies, and factors associated with Germany’s Energiewende – an energy policy based on elimination of nuclear power and a rising share of renewables. No European country has so comprehensively undermined the business model of its big power utilities as has Germany.  MORE