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RWE cancels supply contracts from coal-fired plants

World Coal,

Germany utility company RWE has cancelled long-term supply contracts from coal-fired power plants worth over 1 GW. The cancellation comes as the company announces additional measures to counteract a sharp downturn in earnings in its conventional power generation business.

Since Q3 2013, RWE has introduced capacity measures of roughly 2.3 GW. This included the company’s recent decision to mothball the 1.3 GW combines-cycle gas turbine Claus C power plant in the Netherlands.

In mid-2013, RWE released plans to terminate long-term supply worth 1170 MW between Q4 2013 and Q4 2014.

The company has now said it would terminate a further 1025 MW of contracts with German coal-fired power plants by the end of 2014.

The terminations mostly relate to contracts with Germany’s fifth-largest power producer, Steag.

Regular assessments of RWE’s entire generation portfolio will continue, the company said. The utility noted that its lignite-fired Frimmersdorf P and Q units, as well as the older Westfalen C unit, were under particular review.

At current market prices, 20 – 30% of RWE’s power plants are unable to cover their operating costs, according to RWE chief financial officer, Bernhard Gunther.

STORY RWE announces huge writedown

The operating results from RWE’s conventional power generation fell by over 57% year-on-year to around € 1.4 billion in 2013. The company recorded impairment losses of € 4.8 billion in 2013, of which half related to its Dutch generation portfolio. The impairments resulted in a net loss of € 2.8 billion – the first net loss the company has recorded in 60 years.

Lower wholesale power prices, depressed clean dark and spark spreads in European core markets, as well as the full auction of CO2 certificates under phase 3 of the EU emissions trading scheme allowances, all contributed to the generation business suffering over 2013.

RWE’s chief executive Peter Terium said that the trend toward falling earnings from coal and gas-fired power plants was “irreversible”, adding that he expected the pressure on its power generation business to continue. 

Edited from various sources by Sam Dodson

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