|Bid||30.80 x 410300|
|Ask||30.81 x 177800|
|Day's range||30.71 - 31.24|
|52-week range||20.05 - 34.99|
|Beta (5Y monthly)||1.11|
|PE ratio (TTM)||2.18|
|Earnings date||12 Nov 2020|
|Forward dividend & yield||0.80 (2.58%)|
|Ex-dividend date||29 Jun 2020|
|1y target est||N/A|
(Bloomberg Opinion) -- When finance types talk about internal combustion engines, they often just use the abbreviation ICE. It’s an appropriate name: Investors have a frosty view of car companies that depend on petrol or diesel to power their vehicles.Volkswagen AG, the world’s biggest auto maker by sales, has a market value of 73 billion euros ($87 billion), or about 6.5 times the earnings it generated last year. By contrast, Tesla Inc.’s all-electric lineup has propelled it to an astonishing $352 billion valuation even though its profits are tiny. Budding Teslas such as Rivian Automotive Inc. and Nikola Corp. have achieved multi-billion dollar valuations before even delivering their first electric vehicles.The traditional industry giants of Germany and Detroit, such as Volkswagen and General Motors Co., must be hugely frustrated by the market’s favoring of Elon Musk and his upstart peers. Tesla has impressive software and battery technology, but others know how to build a decent electric vehicle now. Established carmakers are spending tens of billions of dollars on doing exactly this; they just aren’t very good at getting credit for it. Some environmentally focused investors refuse to ignore the fact that the incumbents still make lots of gas-guzzling SUVs. So perhaps the answer is for automakers to spin off their electric-vehicle activities to try to get the market to ascribe them Tesla-like valuations. It’s an approach that’s worked for utilities, which are gradually freeing their renewable-energy assets from the shackles of their legacy hydrocarbon businesses.GM and Volkswagen have both made massive bets on electric cars. Their battery technology is increasingly competitive and they’ve sought partners to build their own battery-cell plants, as Tesla has done with Panasonic.Their new vehicles are pretty eye-catching too. In the autumn, GM will launch an electric version of its hulking Hummer, which could give Tesla’s much-hyped Cybertruck some serious competition. Meanwhile, Volkswagen has just launched the ID.3 compact, the first vehicle built on its new “MEB” vehicle platform, which will be used as the base for its other mass-market electric models.(2) Volkswagen is licensing the platform to other carmakers, including Ford Motor Co., so it could become a money spinner. The German company will probably pass Tesla and become the world’s largest producer of electric vehicles in 2022, when it should sell more than a million battery-powered cars, according to Deutsche Bank analyst Tim Rokossa.You can see why Rokossa and his American colleagues are urging GM and Volkswagen to separate their electric vehicle activities. This would help unlock value and maybe let the companies raise capital more easily. GM has already separated its Cruise autonomous-driving unit, helping it to raise billions of dollars from investors including SoftBank’s Vision Fund. Why not do similar with GM’s Ultium battery system and the GM vehicles that use it?Other industries upended by the energy transition are thinking along similar lines. German utility RWE AG’s shares have soared since it completed an asset swap with rival Eon SE that left it much more focused on generating clean electricity.(1) This week RWE took advantage of that high valuation by raising 2 billion euros of fresh capital. GM sounded somewhat open to the idea of a green spinoff on a recent investor call, although Volkswagen was more circumspect. In part, this reluctance is partly down to Europe’s environmental regulations. The legacy Volkswagen business needs to include electric vehicles to keep the average emissions of its fleet within European guidelines.Carmakers are also naturally wary of hiving off all of their most promising technology, such as electric batteries, for fear that investors might mark down the remaining ICE business as a “bad bank” — albeit a profitable one. How wise is it to chase Tesla’s nosebleed valuation anyway? It can’t be justified by any normal metric.Volkswagen’s complicated governance is another barrier to change. Minority shareholders’ take a backseat to the Porsche and Piech families, the State of Lower Saxony and the trade unions. I’ve written before about how the company’s luxury brands — Porsche, Lamborghini and Bugatti — might be worth as much as 100 billion euros if listed separately and valued like rival Ferrari NV. The people who call the shots at Volkswagen haven’t embraced the idea. A full separation of VW’s MEB business is probably unrealistic but even separate financial disclosure might help the valuation, says Rokossa.Still, there is something enticing about an electric spinoff, which might be good for shareholders and workers. Tesla has been able to raise more than $15 billion from supportive investors over the past decade, and it could probably raise another $5 billion tomorrow if it wanted. Volkswagen, meanwhile, must fund its electric investments — estimated at 30 billion euros over five years — mostly from its own cash flows, meaning there’s less money left over to pay employees. Perhaps if Tesla did weaponize its share price by raising another enormous chunk of cheap capital, that might convince rivals to think more creatively.(1) Audi and Porsche developed a separate electric platform for the luxury segment, called PPE.(2) Though RWE does still operate coal plants.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- For a country that prides itself on its clean, green image, Germany’s power sector is remarkably dirty.Despite having the third-largest installed base of wind and solar power after China and the U.S., Germany still relied on coal for 45% of its needs as recently as 2015. While the U.K. has been going without the fuel for months at a time, Germany’s legislation on retiring its coal fleets, which passed Friday, will keep plants switched on as late as 2038.That “as late as” is key, though. Switching off the 40 gigawatts of coal power currently in operation is structured as a series of deadlines, rather than appointments — and there are strong incentives for generators to quit the market early. With benchmark prices for coal-fired power already in negative territory right now, don’t be surprised to see the entire industry shuttered by the middle of the decade.To understand why, it’s worth considering that Germany’s main coal-fired utilities RWE AG, Uniper SE and Lausitz Energie Kraftwerk AG aren’t so much operators of industrial plants as commodity brokers trading the spread between processed and unprocessed products. Just as agricultural traders hope to make money on the crush spread between soybeans, soymeal and soya oil and refiners profit from the crack spread between crude, gasoline and diesel, coal-fired utilities trade the dark spread.The dark spread represents the price of electricity in the forward market, minus the cost of coal and carbon credits, plus an adjustment for the efficiency of generators. It’s essentially the profit utilities can make on each megawatt hour. Thanks to the rise of European carbon prices in recent years, that number is already deep in negative territory.That’s not quite as bad as it looks for Germany’s coal-burners. They tend to fix their prices years in advance, and still have substantial stockpiles of carbon credits bought years ago for about a fifth of what they cost right now.Thanks to that aggressive hedging activity, RWE reckons it will reliably make between 26 euros and 32 euros ($29.30 and $36.06) a megawatt hour through 2023 on its coal and nuclear generation. With enough carbon credits to hedge its exposure out to 2030, it will still be able to at least break even and potentially make as much as 200 million euros a year even after earnings decline substantially from 2023 to 2025, according to a March presentation. There’s an extra issue that needs to be factored in, though. Germany’s coal retirement plan will reward the generators that switch off early, with compensation payments starting at 165,000 per megawatt in initial auctions this year, declining to about half that amount in 2024. With fuel and power hedges rolling off after 2023, and exposing the utilities to something much more like current dark spreads, generators will find themselves with a fleet of marginally profitable plants worth more as compensation cases than as functioning power stations.The best hope for fossil-fired generators is that Germany’s mistaken decision to shut down nuclear power early, plus ongoing problems in getting permits to build onshore wind, lifts electricity prices enough to put dark spreads back in positive territory for a few more years. In the face of a market that had seen electricity demand stagnate for 15 years even before coronavirus hit, though, that’s a slim hope, and one likely to be rapidly snuffed as electricity imports from the rest of Europe rise.The generation mix is already showing where things are headed. Without any closure plan or compensation payments, coal’s share so far this year has been less than 20%, compared with 43% as recently as 2016. Solar, a technology that was negligible a decade ago, last year contributed more electrons to the grid than black coal. Wind has overtaken brown coal, too.Germany’s generators have spent most of the past few years negotiating with the government about the payouts they’ll receive in return for switching off their coal boilers. While doing that, they’ve got a strong incentive to make thermal power stations look as profitable as possible — but once the payouts have been written into law, there’s little incentive to keep running plants that barely cover their costs. Those stockpiles of carbon credits could even be sold at a profit to businesses with more of an incentive to use them.It’s possible that Germany’s coal generators limp on for a period after 2025, mostly mothballed, available as occasional back-up that can be switched on in winter or on calm cloudy days when other technologies fall short. What matters for the global climate isn’t the technical capacity of grid-connected thermal power stations, though, but the tonnage of coal they burn and the carbon dioxide that emits. It’s not Germany’s retirement plan killing that off. With a price on carbon, renewables are simply out-competing coal on the open market.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Declining cost of wind power generation sets the stage for Utilities to shun coal and adopt wind energy, as well as for corporates to invest heavily in the U.S. wind industry