Rwe Stock: Elliott Urges Expanded Share Buyback Program

The activist investor Elliott Advisors has acquired a substantial position of nearly five percent in German energy giant RWE and is now pushing for an expansion of the company's current share buyback program. While Elliott welcomes RWE's recently announced 10 billion euro reduction in investments (approximately 25 percent) for 2025-2030 and the implementation of stricter investment criteria with higher return requirements for new projects, the financial investor expressed disappointment over the "lack of clarity" regarding specific measures to increase shareholder returns. In November, RWE announced a share buyback program of up to 1.5 billion euros scheduled to begin in Q4 2024 and extend over a maximum period of 18 months. Elliott, known for its aggressive approach in the energy sector, described the energy company's measures as "an important first step toward more disciplined capital allocation" while emphasizing that given the investment cuts and RWE's continued undervaluation, there exists a "compelling opportunity" to significantly increase and accelerate the current share buyback program.

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RWE has drastically scaled back its renewable energy investment plans, reducing its original target from 45 billion euros to 35 billion euros through 2030. This strategic shift follows several challenges including political uncertainties in the US, high interest rates, and supply chain issues, with a major setback being the cancellation of a billion-dollar offshore wind project near New York. Despite projecting a profit decline for 2025, with EBITDA expected to fall to between 4.55 and 5.15 billion euros from 5.7 billion the previous year, the company plans to increase its dividend to 1.10 euros with annual growth of 5-10 percent through 2030. The stock has shown interesting technical signals, rising over 10 percent in six weeks until mid-March before dropping approximately 3 percent following the investment cut announcement, with analysts divided on its prospects.