- Deterioration in the general conditions, expected burdens in the area of nuclear power and more intensive competition means a faster pace is required
- Further measures to improve earnings in the order of 250 million euro to be implemented by 2020
- Areas of priority: sales, generation and trading and administrative functions
Karlsruhe. EnBW is increasing the tempo of its realignment with further measures to achieve targeted improvements in earnings. This is taking place against the background of falling electricity prices, additional expected burdens in the area of nuclear power due to the compromise offered by the KfK and intensive competition above all in the sales business. Following on from the significant improvements in efficiency achieved up to now, the aim is to achieve further cost reductions in the order of around 250 million euro by 2020. The planned measures primarily focus on the three areas of sales, generation and trading and administrative functions and will be implemented within different timeframes. Customer-oriented business will be concentrated more directly on profitable activities, the faster development of new business models and the rigorous application of digital technology.
EnBW CEO Frank Mastiaux: “Our goal remains unchanged and that is to have a healthy and future-oriented EnBW which will be resilient even in the face of difficult market conditions and will, as a result, be able to focus all the more on innovation and growth. Achieving this goal urgently requires sufficient profitability and investment capabilities. The renewed deterioration in the general conditions and the fact that we need to restructure sales much more quickly as an important pillar of our growth strategy both mean that additional measures to safeguard the future are necessary. These measures will be consistently oriented to the criteria of competitiveness and growth. Therefore, we will not use a broad-brush approach but instead focus on specific targets. We have now taken the first concrete decisions and will be working on further steps in the coming weeks and months. These steps will be completed with both great determination and also a strong sense of social responsibility.”
Sales: Withdrawal from the unprofitable large customer business – focus on improved products and services for private customers
In the first stage, it was decided that the brands EnBW and Watt will withdraw from the traditional electricity and gas sales to large customers (such as industrial companies or redistributors). Thomas Kusterer, CFO: “The price competition has increased significantly in this business area. Following an in-depth analysis and the examination of all options, we came to the clear conclusion that it will neither be possible to operate the traditional large customer business profitably for us in future nor does it offer sufficient growth potential.” Ongoing or already concluded customer contracts will be fulfilled reliably and in their entirety. Around 400 employees are affected by this decision. Alongside voluntary severance agreements, these employees will be offered alternative employment within the Group where possible. Other specific human resources measures are the subject of the now immediately pending negotiations with employee representatives. In accordance with the existing collective pay agreements, compulsory redundancies are excluded.
Kusterer: “This decision enables us to focus our financial resources on those business fields in the sales sector that have sufficient growth potential and whose profitability we can increase in a sustained manner.” This includes, in particular, the private customer business that will continue unchanged.
Further measures to strengthen the private customer business, generation and trading and administrative functions are planned
Further measures will be examined in the coming months. For example, the private customer business will also be organised in a more customer and competition-oriented way. Mastiaux: “Our sales brands currently occupy a strong position on the market, which we aim to further expand. However, the competition in this area is also becoming tougher and new players are entering the market. In order to stay ahead of the competition, we will work on our efficiency and develop new products more quickly that will achieve commercial success.”
The area of generation and trading is directly impacted by the current fall in electricity prices. In the past few years, significant improvements have been made here to counteract the deterioration in the general conditions experienced up to now. Amongst other things, we have thus reduced our conventional output by a total of 1,700 megawatts and achieved further optimisations through cross-site concepts. Kusterer: “The situation has become even more acute this year due to the continuing fall in the price of electricity. Although we have already exploited a large amount of potential for reducing costs, there is now no alternative but to identify further new measures if we want to make EnBW even more efficient overall.” EnBW power plants continue to make a significant contribution to the security of supply in Baden-Württemberg.
All measures in the operative areas will also have an impact on administrative functions. Kusterer: “Here, certain functions will either no longer be necessary to the same extent or will be completely eliminated. In addition, a further improvement in efficiency in this area will also contribute towards the company's overall competitiveness.”
EnBW adhering to its targets for 2020
The already adopted as well as the newly planned efficiency measures underline the desire of EnBW to still achieve the targets set for 2020 despite the renewed massive deterioration in the general conditions. Therefore, they form a consistent step along the path towards the strategic realignment that began in the middle of 2013 – which was designed to combat the fundamental upheaval in the energy market from the very beginning through growth initiatives and also structural and efficiency measures. Mastiaux: “In view of the difficult general conditions characterised by tough competition, growth and efficiency are and have been the two pillars for the future viability of EnBW since the beginning of our realignment. And we have also made clear progress in both these areas in the past few years. The current measures will link in consistently and harmoniously with our strategy.”