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RWE CEO says power business cuts must continue

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RWE Chief Executive Rolf Martin Schmitz says his company has no choice but to continue with cost-cutting measures at its power generation business. However he also expressed confidence that the company’s conventional power fleet has a strong future due to the need for baseload generation.

Reuters reports that following a year that included its biggest ever net loss and the listing of its renewable and networks unit Innogy, RWE is under pressure to find a new business model based on its struggling power plants and volatile commodity trading.

Forward wholesale power prices for 2017 ended up at 27 euros per megawatt hour (MWh), up from 20 euros at the beginning of 2016, pushing most conventional power plants into loss as excess solar and wind capacity has priority access to the grid.

"But even this price is lower than anything that has been seen in more than 10 years. So there's no reason to sit back and relax," Schmitz said, adding cost cuts at RWE's power plant business needed to continue.

He added that he is counting on the need for baseload power, which renewable energy sources cannot provide, renewing calls for capacity payments for fossil-fuel based power plants, similar to those in Britain and France.

Schmitz said there were three main elements to the company's strategy at this juncture: "We will continue to optimise our power generation operations. We will leverage the potential linked to our core business and we actively ensure new solutions to ensure security of supply."

"I am more convinced than ever that power plants and large scale storage are absolutely necessary as back-ups. And that makes us at RWE indispensable."

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