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Investing.com -- RWE (LON:0HA0) on Thursday reported stronger-than-expected earnings in 2024, with adjusted EBITDA reaching €5.7 billion, while ramping up its renewables expansion.
However, facing a more uncertain investment climate, the company is tightening its project selection, increasing return requirements, and scaling back planned investments through 2030 by €10 billion.
Despite this shift, RWE continues to grow its renewable energy portfolio, with green power now making up over 40% of its electricity production and CO2 emissions dropping 13% year-over-year.
The company posted an adjusted net income of €2.3 billion, allowing it to confirm a dividend proposal of €1.10 per share for the fiscal year. RWE invested €10 billion in expanding its renewable energy portfolio, commissioning new projects with a total capacity of approximately 2 gigawatts.
Electricity production from renewable sources reached nearly 50 terawatt hours, increasing the share of renewables in the company’s overall generation.
RWE is adjusting its investment strategy in response to a more uncertain economic and regulatory environment.
While the company remains committed to expanding its renewable energy capacity, it has increased the required return rate for new projects from 8% to more than 8.5%.
As a result, its planned net investment for the period from 2025 to 2030 has been reduced by €10 billion, bringing the total investment plan to €35 billion.
A portion of the savings will be redirected toward a share buyback program worth up to €1.5 billion, expected to be completed by the second quarter of 2026.
RWE currently has 12.5 GW of projects under construction, with €13 billion in capital expenditure already committed at an average return of 8.3%.
While all 2025 investments are set, the company has more flexibility from 2026 onwards. Additionally, RWE has disclosed plans to sell 49% stakes in multiple projects, including Nordseecluster and Thor in 2025, as well as Sofia and Norfolk in 2026.
The offshore wind segment generated an adjusted EBITDA of €1.56 billion in 2024, slightly down from €1.7 billion in the previous year, primarily due to lower electricity prices on forward sales and higher maintenance costs.
The onshore wind and solar division saw improved performance, with an adjusted EBITDA of €1.5 billion compared to €1.2 billion in 2023.
This increase was driven by the commissioning of new wind and solar farms, as well as a full-year contribution from the US-based Con Edison Clean Energy Businesses, which RWE acquired in March 2023.
Flexible generation saw a decline, with adjusted EBITDA falling from €3.2 billion in 2023 to €1.95 billion in 2024.
While power plant optimization revenues were better than expected, they remained significantly lower than the previous year’s exceptionally high levels.
The supply and trading division posted €0.68 billion in adjusted EBITDA, surpassing expectations but lower than the €1.6 billion recorded in 2023.
Despite the heavy investment in expanding its energy generation capacity, RWE maintained a solid financial position.
Net debt increased to €11.2 billion by the end of 2024, largely due to capital expenditures.
However, strong operating cash flow and proceeds from selling a stake in the Dogger Bank South offshore wind project helped offset some of the debt increase.
The leverage ratio remained at 2.0, well below the company’s self-imposed upper limit of 3.0. Total (EPA:TTEF) capex for 2024 was €11.24 billion, up from €9.98 billion in 2023.
For 2025, RWE projects an adjusted EBITDA between €4.55 billion and €5.15 billion, with adjusted net income expected to range from €1.3 billion to €1.8 billion.
The forecast accounts for normalizing electricity sales margins and short-term power plant dispatch optimizations, while new renewable energy and battery storage projects are expected to contribute positively.
The company remains confident in its mid- to long-term earnings potential, reiterating its target of achieving adjusted earnings per share of around €3 in 2027 and €4 by 2030.
RWE is also planning to continue increasing its dividend. The proposed dividend for 2024 is €1.10 per share, a €0.10 increase from the previous year.
The company intends to raise the dividend again by €0.10 for 2025, bringing it to €1.20 per share.
RBC Capital Markets analysts noted that "we think the cut in capex and higher return targets will be taken positively, alongside the reiteration of the medium-term guidance, despite the decline in investment."