Enkraft buys into RWE and pushes for lignite activities separation
Wind turbines in Germany. Image by: RWE AG.
Activist investor Enkraft Capital GmbH has built a notable ownership interest in RWE AG (ETR:RWE) and is now urging the German energy major to separate its lignite activities from the group and to focus on its renewable energy operations.
In a letter to RWE’s CEO Markus Krebber, Enkraft managing director Benedikt Kormaier discloses that the investment firm currently holds over 500,000 shares in RWE and ranks among its 50 largest shareholders. Based on the current stock price of EUR 33.17 apiece, Enkraft’s stake in RWE is valued at over EUR 16.5 million (USD 19.5m).
In a complex asset-swap concluded last year, RWE acquired the renewable energy business of peer E.on SE (ETR:EOAN) and of its own unit Innogy before selling the latter to E.on. Enkraft notes that RWE now has one of the largest renewable energy portfolios in all of Europe, amounting to 9.3 GW. Moreover, the group has plans to expand it to more than 13 GW by 2022. RWE’s total renewables pipeline includes around 34 GW of projects, with 10.2 GW of offshore wind.
This places the German company ahead of Acciona SA, Engie SA, Ørsted A/S, Vattenfall and SSE Plc in terms of wind and solar capacity in its portfolio, and ahead of SSE, Macquarie Group Ltd, Vattenfall, Shell, EDF and EnBW when comparing their offshore development pipelines, according to charts included in the letter.
Enkraft says that RWE’s lignite activities are economically negligible and ecologically problematic for the group and that its strategic adherence to these operations is leading to significant value erosion. Furthermore, these assets are seen as a barrier between RWE and “an ever-increasing number of investors who want and are required to invest responsibly within the framework of ESG criteria.”
“It is up to RWE, as the owner of the lignite activities, to quickly submit responsible and holistic proposals for a careful and sustainable wind-down of the activities and, if necessary, new utilization concepts to shareholders, politicians, and the affected municipalities,” the letter reads.
“We are convinced that focusing on the promising Renewables Business and a rapid, if necessary also gradual spin-off of the lignite activities will generate enormous value upside potential which in parallel will also allow the strengthened RWE to pursue the expansion of its Renewables Business even more ambitiously,” Kormaier says further.