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RWE warns UK tax on generators will risk £15bn investment in renewables

The head of RWE has warned that Germany’s largest utility company will reconsider its planned £15 billion investment in the UK’s renewable energy sector if the country taxes wind to the generator.

RWE is one of the UK’s largest electricity producers, providing around 15% of the country’s electricity through assets such as gas plants and wind farms.

But chief executive Markus Krebber warned a wind tax on power generation profits would force a rethink of planned investments in areas such as offshore wind.

“With the present [fiscal] As part of our commitment to invest £15 billion in the UK by the end of the decade,” Krebber told the Financial Times. “[That is] net investment from RWE, it will be higher with our partners and if things change, we will reconsider”.

He added: “If the environment changes – and part of that is of course the legal framework and political decisions – then people will reconsider.”

Several leading investment groups including Newton Investment Management and Baillie Gifford have also warned that a tax levied on Power industry would be “short-sighted” and hinder the rollout of renewable energy technologies in the UK as the government wants to boost domestic electricity supplies.

Prime Minister Rishi Sunak in May criticized power plants for making “extraordinary profits” due to high electricity prices. He said the Treasury was looking at “appropriate steps” to ensure the sector contributed to a £15 billion support package for households facing soaring energy bills. Sunak has imposed a 25% “profit from energy” on UK oil and gas producers.

Paul Flood, a portfolio manager at Newton Investment Management, which has invested just under £1 billion in renewable energy in the UK, said his team will be “thinking very carefully about the holdings” keep our current in the UK” if Sunak imposes additional tariffs on generators.

American colleagues at Newton canceled “substantial” investments in UK renewable energy companies because of regulatory uncertainty, Flood added.

Nicoleta Dumitru, a multi-asset investment manager at Baillie Gifford, whose shares include a 5% stake in renewable investment fund Greencoat UK Wind, said the withdrawal tax would “potentially slow the pace of the pace.” renewable energy deployment in the UK”. “It would be a real shame to see a tax revenue drop for the sake of attraction [of the UK market]’ said Dumitru.

Jim Wright, a fund manager at Premier Miton Investors, which invests in groups like RWE and SSE through a global infrastructure fund, warns that many other countries are trying to attract invest in renewable energy as governments seek to reduce dependence on Russian gas.

“The increase in perceived risk in UK investment increases the likelihood that other jurisdictions will prevail in attracting capital,” said Wright.

The Treasury Department said it found that any steps taken after assessing the profitability of power plants needed to be “proportionate and avoid creating undue distortion or impact on investment.” of Great Britain”.

Billions of pounds have been wiped off the value of London-listed power companies such as SSE, Drax and Centrica since the Financial Times first reported in May that Sunak planned to extend the corporate income tax for this sector.

However, companies’ share prices ended the week higher as government officials privately signaled to energy executives that the industry was too “complicated” and that they feared an additional tax would may “impede investment”.

RWE’s warning risks worsening relations with the UK government. It is among a number of energy companies that have angered ministers by delaying the start of a long-term contract for the Triton Knoll wind farm off the Lincolnshire coast – a move that will allow them to benefit from higher prices in the spot electricity market.

The joint venture that owns Triton Knoll, of which RWE is the largest partner, has made more money for its electricity generation from phase three of the plan after it decided to postpone the start of the contract by one year. The practice is legal but considered exploitative by ministers.

Krebber insists the UK government should look at the profitability of generators over a longer period of time.

“When I look at our investment in the UK, of course sometimes you make more money but we also have periods where we don’t literally make money from our asset base. I’m in England,” he said.

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