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RWE AG : RWE Scales Down Biomass Activities to Focus on Wind, Hydro Energy

02/22/2013 | 06:06am US/Eastern

By Jan Hromadko

FRANKFURT--The renewable energies unit of German power and gas utility RWE AG (RWE.XE) is narrowing its focus to concentrate on wind and hydro power, reducing its activities in biomass fuels like wood and straw, presently its third core area in "green" energy production, the company said Friday.

"RWE no longer considers the business with smaller biomass facilities as core business," said a spokesman for RWE Innogy.

Going forward, the company doesn't plan further substantial investment in biomass facilities, the spokesman added.

The comments coincided with the announcement of the sale of majority stakes in two small German biomass facilities to Koehler Renewable Energy GmbH, a unit of Germany's Koehler Holding GmbH. No financial details of the transaction were disclosed.

RWE Innogy said, however, that the sale reflects the company's tight financial situation.

"In times of scarce [financial] resources the transaction contributes to retain the financial leeway for projects, particularly in wind and hydro energy," the company said.

Like other energy utilities across Europe, RWE is suffering from falling energy demand and lower prices, which have eroded the profitability of electricity production.

In response to the increasingly challenging market environment, RWE is implementing a cost-cutting program through which it hopes to wring savings of around 1 billion euros ($1.3 billion) through 2014.

Other measures aimed at conserving cash include a program to dispose of EUR7 billion in assets by the end of this year.

Citing Hans Buenting, chief executive of RWE's renewable energies unit, German daily newspaper Handelsblatt earlier Friday reported that the company is considering disposing of other biomass businesses, including a wood pellets factory in Waycross, Georgia.

The company spokesman said that other disposals cannot be ruled out, but added that no decisions have yet been made.

However, while smaller biomass facilities are no longer part of RWE's core business, the company said it still plans to use biomass as fuel in industrial-scale power plants, like its U.K.-based biomass power station in Tilbury.

The former coal-fired power plant was converted in 2011 to burn wood pellets, which RWE sources from its factory in Georgia.

Write to Jan Hromadko at jan.hromadko@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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