Contrariwise

12 May 2003

Yet RWE has hugely underperformed and now trades at a 20% discount. This does not make sense. Over the past three years, the two German utilities have made similar mistakes especially in M&A.

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German utilities RWE and E.ON report first quarter earning figures this week.

E.ON will consolidate the German gas network Ruhrgas, that it bought for E10bn, for the first time. Group operating profits are forecast to rise by 7% to around E1.4bn. RWE will meanwhile consolidate American Water Works, also for the first time. Group operating profits are expected to rise by almost 20% to 1.59bn.

Both firms have recently appointed new chief executives. Wulf Bernotat, formerly from transportation group Stinnes, took over the post at E.ON on May 1. Harry Roels, formerly from Shell, formally picked up the reins at RWE in March. Both have said they want to concentrate their efforts on integrating recent acquistions.

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