RWE shareholders reject lignite spinoff request, but call for faster renewables shift

A vast majority of RWE shareholders have rejected a request to force management to start preparations for a spinoff of the company's brown coal activities, but major investors agreed with criticism that the company’s shift to renewables was too slow. At the company's annual general meeting, almost 98 percent of the voting share was against the initiative by activist shareholder Enkraft, RWE said. Enkraft wanted to force RWE to present a draft spinoff plan within a year, arguing that the division is economically negligible in the long term, poses a financial risk, and is environmentally questionable. The investor, which holds 0.03 percent of RWE shares, argued that RWE's transition to renewables is not rapid enough.

RWE Chief Executive Markus Krebber said a spinoff would not accelerate RWE's sustainability strategy. "Acting with a crowbar without regard for political and legal hurdles is not a solution. Any change of plans with lignite can only be made with the consent of politicians," Krebber said, according to a report by business daily Handelsblatt. The head of sustainability and corporate governance at major investor Deka Investment, Ingo Speich, also spoke out against the motion. "We do not want to limit management's options for action by formal resolution and weaken RWE's negotiating position by setting hard time targets and disclosing information," Speich said. But he agreed that RWE's sustainable transformation was too slow. "The company's electricity production is not sustainable. The goal of achieving climate neutrality by 2040 is a long way off." The head of sustainability at Union Investment's portfolio management, Henrik Pontzen, also rejected the move: "It doesn't help the environment if RWE emits less CO2 and another owner generates electricity from Rhenish lignite instead."

But RWE was open to the government coalition's idea to establish a foundation that organises the decommissioning of coal-fired power generation and renaturation, Handelsblatt reported. Insiders told the paper the plan involved a complicated swap deal in which the operators of lignite mines and power plants would lose control over the assets, but also get rid of the associated financial risks. But details are not yet known. "We are actively involved in the discussions about a possible implementation," RWE finance chief Michael Müller told the general meeting.

RWE is planning to invest some 50 billion euros in renewables by 2030, but its power generation remains dominated by fossil fuels. Last year, the company generated 20 percent of its electricity with renewables, compared to almost 30 percent with lignite, 4 percent with hard coal, and almost 33 percent with gas. The company's CO2 emissions rose more than 20 percent in 2021 to 80.9 million tonnes as the economy recovered from the effects of the coronavirus.