Karlsruhe. As a result of the continuing and recent sharp fall in electricity prices, EnBW has once again recognised high impairment losses in the Generation and Trading segment. The impairment losses mainly relate to power plants approx. 700 million euro. In addition, the increased provisions of 215 million euro for onerous contracts for electricity procurement agreements which no longer cover costs that were recently stated in the Six-Monthly Financial Report have been increased further by approx. 35 million euro. The total extraordinary items amount to 950 million euro. EnBW already needed to recognise impairment losses of more than one billion euro in June 2014.
The negative development of electricity prices has accelerated since then. The wholesale market price for electricity has fallen by a further 30 percent or by almost 10 euro to below 23 euro since June 2014 alone. Thomas Kusterer, Chief Financial Officer: “The recent dramatic fall in commodity prices, as well as the resulting and also clear reduction in the wholesale price for electricity, could not really have been foreseen. It places increasing pressure on the economic viability of conventional generation, which will still continue to be indispensable for ensuring a secure supply of energy in Germany for a prolonged period of time. We do not see any signs of a recovery neither in the short nor medium term. Therefore, we have significantly reduced the forecasts for the long-term earnings performance of our power plants. This has made it necessary to make adjustments on the balance sheet that will not, however, have any impact on the operating result or the ability of the Company to pay dividends for 2015."
The current adjustments on the balance sheet were carried out as part of the preparations for the 2015 annual statements that included the completion of impairment tests in accordance with the international financial standards (IAS 36). Despite these extraordinary expenses, EnBW is expected to be able to post a Group net profit for the 2015 financial year. The forecast for the development of adjusted EBITDA (decrease of 0 percent to 5 percent) remains unchanged.
In its strategy presented in the middle of 2013, EnBW anticipated a significant fall in earnings from conventional generation of 80 percent or from 1.1 billion euro to 0.3 billion euro in the period between 2012 and 2020. This fall in earnings should be compensated for by a corresponding growth in earnings in the Renewable Energies (250 percent), Grids (25 percent) and Sales (100 percent) segments up to 2020.
Provisions for onerous contracts and the generation portfolio
EnBW operates its own power plants and also obtains electricity from power plants that do not belong to the Group. In the case of this supplied electricity, EnBW is obligated to reimburse the operators of the power plants for all of their costs. Due to the deterioration of the market, these power plants and also those plants owned by EnBW can no longer be operated as profitably as before. EnBW is thus forced to recognise impairment losses over the contractual periods for which the Group is required to make so-called provisions for onerous contracts for the duration of these procurement agreements.
On the right side you will find a download of the press release with the Generation portfolio of the EnBW Group.