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Germany’s RWE under scrutiny over market manipulation claim

Published by , Editorial Assistant
World Coal,

Lawyers have referred major utility RWE to Germany’s federal financial regulator over a market disclosure it made last year that wiped over €1 billion off its market value.

ClientEarth claims that the company overstated the impact of a 2018 court ruling suspending its plans to clear the Hambach Forest for lignite mining. 

The lawyers have asked Germany’s Federal Financial Supervisory Authority (BaFin), to investigate the misleading and potentially unlawful statement. International law firm Hausfeld are acting for ClientEarth in the complaint.

ClientEarth lawyer Peter Barnett said: “The profitability of RWE’s lignite fleet is in decline, but not because of last year’s court decision. The claim that the Hambach ruling would affect the company’s bottom line in the amount notified to the market does not withstand scrutiny. 

“We have notified the regulator to ensure a proper investigation into RWE’s claims – investors must be given correct information with which to make decisions.”

The Higher Administrative Court Münster suspended RWE’s forest clearance on 5 October 2018. On the news, RWE, a leading player in Germany’s lignite industry, told investors the ruling would affect its earnings in “the range of a low three digit million Euro amount per year”, due to the projected reduction in output from its Hambach mine. Its share price dropped dramatically following the ruling and subsequent announcement.

However, an independent report by energy consultancy Energy Brainpool, cited in ClientEarth’s referral to the regulator, suggests that this was a vast overstatement and the ruling would not have had a significant impact on RWE’s earnings. RWE’s lignite demand was going to reduce anyway: the company, as part of German coal phase-out scheme the ‘lignite reserve’, had already agreed to mothball five power plant units, collectively burning around 11 million tpy of coal, by 2019. 

Barnett added: “The profitability of the German lignite fleet is collapsing. RWE needs to be upfront with its investors about this – not make unfounded claims that present a false picture to the market.

“As the German government considers phase-out compensation for coal operators, it is in everybody’s interests – and legally imperative – that accurate numbers are being discussed. This is why we are calling on BaFin to investigate.”

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