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RWE Energy’s operating result was up 5 % to €2,480 million, confirming our expectations. Earnings improvements in the electricity supply business and cost reductions were the drivers. However, earnings were negatively affected because our German grid fees suffered another substantial reduction as a result of the second regulatory review of costs after the introduction of regulation. This led to a drop in earnings of €473 million compared with 2007. Furthermore, we incurred additional expenses to procure balancing power Glossary. One-off effects from the accrual and release of provisions affected earnings: Overall, they had a negative impact on our international activities and a positive influence on the “Other, consolidation” line item. The net effect of consolidation and reclassification on the operating result was an increase of €49 million; foreign exchange rate differentials had an additional impact of €75 million. The following is a breakdown of the operating result by business unit:
- German regions: RWE Energy’s domestic regional companies closed the reporting period 16 % up year on year–despite fee cuts imposed on their distribution grids. The resulting burdens were limited by cost-reducing measures. Earnings in the German electricity supply business recorded an improvement, despite the significant rise in pressure from competition. Gains in sales volume contributed to this. The first-time consolidation of small companies also had a positive effect. We also had higher income from investments. However, the rise in procurement costs in the gas supply business had a counteracting impact. We were only able to pass part of the cost increase through to our end customers. Several regional companies did not implement necessary tariff rises until the second half of the year.
- International regions: We fell 31 % shy of the extraordinarily high result achieved in the Continental European grid and supply business outside Germany in 2007. The prior-year figure had benefited from positive one-off effects, which were not repeated in 2008. In contrast, we recorded operating gains, in part thanks to higher electricity margins in Hungary. Moreover, earnings benefited from the appreciation of the Czech crown over the euro.
- Supra-regional operations: The operating result recorded by this business unit declined by 17 %, largely due to regulatory cuts to our German electricity transmission grid fees. As mentioned earlier, costs incurred to purchase balancing power were higher. This is used to balance sudden fluctuations in amounts of electricity fed into and withdrawn from the power grid. There was an increased need for balancing power owing to the rise in wind power production. In addition, we incurred higher costs associated with action taken to strengthen eprimo’s market position.
