Decoding the coming AGM ↓
Within the European Union, Germany plays a key role in the energy transition. However, its main electricity producer, RWE, is one of Europe’s largest coal plant operators and CO2 emitters, and Europe’s largest lignite producer. In 2021, coal still accounted for 33% of its electricity production, and RWE plans to continue running its largest lignite-fired power stations in Germany until 2038. It’s therefore no surprise that many financial institutions have excluded RWE from their financial services following their adoption of a robust coal exit policy. But many investors remain invested in RWE and keep fueling the company’s threatening strategy despite having taken strong climate pledges. For these investors, the upcoming RWE AGM on April 28 is the last chance to take a stand and prevent RWE from stalling Europe’s exit from coal.
Unwillingness to get out of coal
RWE’s fleet of coal-fired power plants, which amounts to more than 9 GW in 2021, is one of the highest emitters in Europe. After having been Europe’s biggest CO2 emitter for a long time, RWE has left the place in 2021 to its Polish competitor PGE, but not by much: the Polish company emits only 1.6% more CO2 than the German energy company. RWE holds the lamentable record of owning 3 out of the top 10 CO2-emitting assets in the EU Emissions Trading System (1), with its lignite-fired power plant in Niederaußem even experiencing a record 36% growth rate in emissions in 2021 compared to 2020.
RWE’s coal phase-out strategy is far from satisfactory and hardly convincing. RWE plans to move away from coal by 2038, 8 years after the scientist’s recommendations, and some of its coal-fired plants do not have a specific closure date.
The German group also engages in lobbying activities aimed at taking advantage of, or even stalling, Europe’s exit from coal. The company is hoping to obtain €2.6 billion in compensation from the German government for the power plants it will have to shut down in Germany by 2038 in order to comply with the national coal exit date (which has since been brought forward to 2030). RWE’s credibility is also being undermined by its lawsuit against the Dutch government, which seeks to challenge the Dutch coal phase-out date of 2030.
Recently, RWE even announced that it was ready to reactivate 3.5GW of coal capacity to cope with possible cuts in Russian gas imports (2), which would contribute to a resurgence of coal in Europe. While Europe is still in the process of moving away from coal, with 159 coal-fired power plants still active (3), the pace of closure of these plants must accelerate, and the revival of previously retired coal capacity would slow, if not hinder, Europe’s efforts to phase out coal.
RWE is betting on fossil gas as a bridge fuel
Not only is RWE in no hurry to get out of coal, but the utility is also increasingly relying on fossil gas. Yet, the IEA’s conclusions to limit warming to 1.5°C are clear: all fossil fuel power plants not equipped with capture devices must be closed by 2035 for EU/OECD states.
In its latest report, the IPCC further indicated that new fossil fuel infrastructures would “lock-in” carbon emissions and make it harder to limit global warming to 1.5 or 2°C, underlining that “decommissioning and reduced utilization of existing fossil fuel installations in the power sector as well as cancellation of new installations are required to align future CO2 emissions from the power sector with projections in these pathways” (4).
But, despite the scientists’ recommandations, fossil gas already accounts for 33% of RWE’s electricity production in 2021, and the group plans to continue to develop its gas capacities between now and 2035.
Additionally, RWE’s future gas supply could be a matter of concern, both for the environment and for human rights. RWE’s gas supply is already problematic, with uninterrupted imports of Russian gas since the start of the war in Ukraine (5). Looking ahead, the German group could turn to American or Qatari LNG, thus continuing to supply operations that have no respect for the environment or human rights.
RWE investors are expected to sanction the company at its general meeting
Financial institutions that are serious about their climate commitment have already excluded RWE from their portfolio. But the German group continues to receive the support of many banks and investors, starting with Crédit Agricole/Amundi, its 2nd largest shareholder, Société Générale, which is both a shareholder and the 4th largest bank of RWE, and BNP Paribas, which provided loans to RWE in 2021.
Crédit Agricole’s subsidiary Amundi held $782 million of RWE’s shares in November 2021. Some thresholds in Amundi’s coal policy appear too unrestrictive to exclude the German group. For instance, the coal production threshold, at 100 Mt/year, is extremely broad and lets RWE and its production of 51 Mt/year through. Regarding RWE’s lack of a transition plan, Crédit Agricole/Amundi plans to limit its investments in companies that do not have a “coherent” transition plan but without defining precisely what that means. Last but not least, another major loophole of Amundi’s policy is that it does not apply to all its passively managed assets …
RWE’s AGM is the last opportunity for its shareholders who have not yet decided to divest to sanction not only RWE’s lack of a transition strategy but also, more importantly, its deliberate plan to delay Europe’s exit from coal. If they do not want to jeopardize their own climate goals, RWE’s investors must reject all of its management’s proposals for its AGM.