RWE Slashes Investment Upon Uncertainties in US Market

Germany-based RWE on March 20 said it plans to cut spending by more than $10 billion net (US$10.9 billion) through 2030 as the company responds to regulatory uncertainties, supply chain constraints, geopolitical risks and higher interest rates.

During the company’s annual earnings report, RWE said it will invest nearly $38 billion during the next five years. The approximately 25% spending decrease was announced alongside stricter investment criteria for new projects in the U.S. and a higher required rate of return for all new projects regardless of market location or technology.

“While the market fundamentals for power demand are promising and significant investments in additional power generation capacity are needed in all our core markets, we are experiencing higher uncertainty in the investment environment,” RWE CEO Markus Krebber told analysts. “We will therefore be even more cautious with regards to additional investment commitments.”

The news from RWE, one of the world’s largest developers of renewable energy projects, was delivered as energy companies face tougher environments. Despite record renewable energy investment from both the public and private sectors in recent years, plus favorable government incentives and a continued drive to lower emissions, some projects remain challenged. In addition to high upfront costs for some projects and higher interest rates, investors are demanding higher returns, inflation is driving costs higher and some projects may be impacted by higher tariffs.

The obstacles come even as demand for power rises, including in the U.S. where data centers and AI operations, the reshoring of domestic manufacturing and electrification in general are among the demand drivers.

Europe is also expected to see a surge in energy demand.

“Our generation from renewables in combination with batteries and the backup from gas is set to deliver the necessary additional supply,” Krebber said. “Significant investments are needed in renewables, batteries and gas generation in all our core markets. However, for massive investments, a stable and reliable investment framework is key, and unfortunately,” uncertainties are anticipated.

Stricter criteria for US

RWE announced in November it would delay investments due to a slower-than-expected ramp-up of the hydrogen economy in Europe and greater risks for offshore wind in the U.S., where President Donald Trump issued in January an order to temporarily halt new wind leasing and permitting.

Given the market environment, RWE on March 20 introduced stricter investment criteria in the U.S. The company will not make final investment decisions on onshore wind, solar and battery projects in the U.S. unless all federal permits have been obtained, tariff risks mitigated, offtake secured and tax credits safe harbored.

Trump has continued to roll back climate regulations set by former President Joe Biden, whose signature climate law made billions of dollars available for renewable energy and lower-carbon initiatives. Trump’s pro-fossil fuel agenda has also weighed on the oil market amid fears related to tariffs and what impact the layoffs of federal workers could have on the already lengthy permitting process for energy projects.

“Questions over the energy policy direction in the U.S. and overall geopolitical tension have potential implications for international trade,” Krebber said. “We need to reflect this environment on our future investment decisions.”

The company has about 10 gigawatts (GW) of installed renewable capacity in the U.S. With more than 170 facilities across 24 U.S. states, RWE’s U.S. generation capacity includes more than 4 GW of solar, 5.2 GW of onshore wind and 0.5 GW of battery storage. It is also a wind leaseholder offshore New York, California and the Gulf.

Higher return hurdle

Globally, “we have 12.5 gigawatts of capacity under construction. We are balanced for technologies and regions,” he said. “For investment decisions taken, we have achieved an average IRR of 8.3 at FID, clearly exceeding our previous 8% target.”

However, the required rate of return for new projects will increase, RWE said, moving from an average of 8% to more than 8.5%.

The reduced capital program included a sell down of interest in several offshore wind projects in the development and construction stage. Some—such as sell downs of stakes in Windbostel (Germany), Dogger Bank South (U.K.) and OranjeWind (North Sea)—have already been executed. Sell downs to come include Norfolk (U.K.), Nordseecluster (Germany), Thor (Denmark) and Sofia (U.K.).

Despite the changes and reduced investment, the company said it is set to deliver on earnings targets. RWE confirmed its adjusted earnings per share targets of €4 by 2030 and annual dividend increase of 5% to 10%.

The company said its projects under construction are de-risked and are expected to deliver attractive returns.

Financial highlights

The planned spending reduction followed a year in which RWE said its earnings “exceeded expectations.”

RWE reported adjusted EBITDA dropped to about €5.7 billion (US$6.2 billion) for 2024, down from €7.7 billion (US$8.4 billion) in 2023. Adjusted net income for 2024 was €2.3 billion (US$2.5 billion), compared to about €4 billion (US$4.3 billion) a year earlier. The decrease was attributed to lower offshore wind prices, “significantly” lower adjusted EBITDA in the flexible generation segment and “exceptionally high earnings level of the previous year” in the supply and trading segment.

RWE’s electricity production from renewables in 2024, however, hit a record of nearly 50 million megawatt hours, up about 8%, the company said.

The company anticipates 2025 adjust EBITDA of between about €4.6 billion (US$5 billion) and about €5.2 billion (US$5.6 billion), with adjusted net income between €1.3 billion (US$1.4 billion) and €1.8 billion (US$2 billion)

RWE said it currently has about 150 projects with a total capacity of 12.5 GW under construction.

“We will commission the majority of these this year and next—a total of around 9 gigawatts of new capacity,” Krebber said during a press conference.