RWE, Germany's largest utility, announced a share buyback program worth up to €1.5 billion ($1.6 billion) as it reevaluates its capital strategy in response to dimmer outlooks for hydrogen initiatives in Europe and offshore wind projects in the United States. This adjustment comes in the wake of Donald Trump's election victory, which has raised concerns over future U.S. policies for clean energy.
The buyback will launch in the fourth quarter and continue over 18 months, reflecting a cautious approach to capital allocation as RWE addresses investor calls for a prudent strategy amid shifting risks in the clean energy sector. “We apply strict return requirements to the investment of our funds and regularly review our capital allocation. If the risk-return profile in certain areas changes temporarily, we reallocate the capital earmarked for this purpose accordingly,” CEO Markus Krebber stated alongside the release of RWE's nine-month financial results.
RWE highlighted specific concerns over U.S. offshore wind projects, where risks have grown following Trump's election, given his prior criticisms of the technology. Potential delays in securing permits for an offshore wind project off the U.S. east coast have been flagged as a challenge. The company also acknowledged that hydrogen production developments in Europe were not progressing as initially planned, in line with similar comments from rival Uniper.
Industry analysts have noted investor pressure on RWE to adopt a more conservative investment approach, especially given heightened risks in U.S. renewables and hydrogen. “RWE finally succumbs to the call of many shareholders and analysts for a more prudent capital allocation,” remarked Benedikt Kormaier from Enkraft, an activist energy fund. He added that RWE's aggressive investments in the U.S. and hydrogen sectors were facing mounting challenges.
Despite these challenges, RWE offered a slightly improved forecast for 2024, anticipating it would reach the midpoint of its target ranges for adjusted core profit (EBITDA) and net profit, owing to strong performance from its trading division and gas-fired power plants. The company had previously expected results to meet only the lower end of its 2024 EBITDA range of €5.2 billion to €5.8 billion and net profit range of €1.9 billion to €2.4 billion. RWE's nine-month EBITDA, however, fell by 30% to €3.98 billion.
