RWE to sell $2.3 billion in hybrid debt in 2012: report
FRANKFURT (Reuters) - German utility RWE (RWEG.DE: Quote) expects to issue 1.8 billion euros ($2.33 billion) worth of hybrid bonds in various currencies over the course of this year, effectively rolling over debts maturing in the same amount, in order to maintain its current credit rating.
"I don't expect any problems this year with refinancing," Chief Financial Officer Rolf Pohlig told German business daily Boersen Zeitung in an interview published on Saturday, ruling out any new share sales.
"Hybrid bonds have the advantage that under certain circumstances, rating agencies classify one half as debt and the other as equity. The coupon is also fully tax deductible, so this combination makes it attractive for us to use hybrid capital even if it is clearly more expensive than normal bonds," he said.
In December, RWE sold the equivalent of 15 percent worth of its stock -- mainly through a capital increase -- but fell 400 million euros short of raising the targeted 2.5 billion euros in fresh equity that it wanted to retain its A- credit rating.
RWE considers a single A rating to be benchmark for European utilities, and the current negative outlook given by both Standard & Poor's and Moody's puts it towards the bottom of its peer group that includes E.ON (EONGn.DE: Quote), Iberdrola (IBE.MC: Quote) and EDF (EDF.PA: Quote).
As a result of the December stock sale, in which investors were entitled to the full dividend for 2011 even if some had only owned RWE stock for less than a month, the payout per share will decline substantially.
"We aim to maintain our dividend policy that distributes 50-60 percent of our recurrent net income," he said, adding this would be paid out this year to a larger number of investors.
The company already forecasts its 2011 recurrent net income will drop by 35 percent, in part due to the phase-out of nuclear energy in Germany.
Much like other utilities, RWE entices investors with a high dividend yield when compared to most blue chips. Last year it paid a dividend of 3.50 euros per share for 2010. Continued...