RWE: European Utility Transitioning to Renewable Power Leadership

Will Thomson of Massif Capital presented his in-depth investment thesis on RWE (Germany: RWE) at Best Ideas 2021.

Thesis summary:

RWE is a European utility on the cusp of becoming one of the three largest renewable-power producers in Europe and a global leader in offshore wind. The firm’s transition from a carbon-intensive fully integrated European utility to a renewable power generation focused operator should drive increased profitability, reduce the firm’s cost of capital, and improve its overall risk profile, increasing equity value on a fundamental basis.

The transition should also result in a shift in investor sentiment. The increased importance of ESG considerations to investors may result in RWE being priced at a higher multiple than it has been historically and more in line with European renewable power peers. Will’s analysis suggests that RWE is likely worth between €55 and €60 per share. Further upside is possible depending on management’s development plans for the period from 2025 to 2035.

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About the instructor:

Will Thomson is a Managing Partner at Massif Capital, a value-oriented investment partnership focused on global opportunities in energy, basic materials and industrials. We invest principally in businesses with long lived assets that generate predictable cash flows and require not only capital allocation acumen from management but also a keen focus on operational excellence. Our investment practice is primarily concerned with the nature of risk and value as it relates to protecting, enhancing and deploying the irreplaceable capital of our investors into a concentrated portfolio of economically productive assets.

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