RWE AG Stock: Green Growth Ahead (OTCMKTS:RWNEF)

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In a previous article, back in early 2020, I identified RWE AG (OTC:RWNEF) (OTCPK:RWEOY) as an interesting long term investment on account of its potential to increase its profitability in the course of a strategic pivot towards renewable energy generation. The stock trades higher now than at the time of my initial article’s publication, but significantly underperformed the broader market at large to date.
Despite a very strong 2023 (€4.5 billion in net profits based on preliminary figures), the stock price took a significant downturn recently, following lowered expectations for 2024. The company now expects 2024 earnings to be towards the lower end of its guidance, thus in the vicinity of €5.2 billion of adjusted EBITDA. While this is not exactly good news, I nonetheless believe that RWE continues to offer an attractive investment profile in the long run. Below, I will give an update on the company and explain my thesis.
Capacity Growth Is Key
The cornerstone of the investment case for RWE is its generation capacity growth. The stated goal is to increase overall capacity to more than 65 gigawatts (the target mark being raised from 50 gigawatts) by the end of the decade, despite phasing out nuclear and coal plants. A net addition of around 5 gigawatts per annum may be ambitious, but it appears achievable. Between 2021 and late 2023, RWE achieved net additions of 9 gigawatts. While this does not quite average 5 gigawatts, it should be noted that within this very time frame, the entirety of RWE’s nuclear capacities was phased out. The company is actually ahead of schedule, so to speak. There are also close to 8 gigawatts of capacities currently under construction already.
RWE achieves growth both organically and via M&A. One notable example is the acquisition of Consolidated Edison, Inc.’s (ED) renewables business (which made it America’s second largest solar operator). As I already noted a few years ago, RWE is much