RWE AG (RWE.XE), Germany's second-largest utility by market value behind E.On AG (EOA.XE), Friday said it plans to more than triple its installed renewable generation capacity by 2012 to reduce its exposure to the trade of carbon dioxide emissions.
The Essen-based company plans to increase the power generation capacity from renewable energy sources to 4.5 gigawatt by 2012 and to over 10 gigawatt by 2020, said Fritz Vahrenholt, chief executive of the renewable energy unit RWE Innogy, at RWE's annual earnings press conference in Essen.
RWE CEO Juergen Grossmann said that CO2 trade will result in additional costs of EUR1 billion to EUR1.5 billion a year in the second trading period of the European Union Emissions Trade Scheme between 2008 and 2012.
RWE is the largest corporate CO2 emitter in Europe due to its strong dependence on coal and lignite-fired power generation.
CEO Grossmann added that the Essen-based company intends to reduce its dependence on its German domestic market, where the company is increasingly restricted from expanding its business in light of regulation.
Grossmann added that in 2008 alone, CO2 trade and German energy grid regulation will prompt additional costs of around EUR1.5 billion.
He added that RWE is currently investigating expansion options in the markets of South-Eastern Europe as well as Russia.
By 2012, RWE plans to generate 50% of its annual operating profit in foreign markets, Grossmann said.
RWE earlier Friday reported 2007 results that fell short of market expectations, sending the shares lower in early trade. The disappointing result was partly due to a revaluation of EUR429 million of the U.S.-based water unit American Water, which RWE intends to publicly float.
CEO Grossmann also reiterated that RWE intends to raise the dividend payout ratio to between 70% and 80% of recurrent net profit after the successfull floatation of American Water.