RWE (RWEG.DE) Quantifying growing optionalities. We see much more to come

Equity Research 14 August 2026 | 7:36AM CEST

RWE (RWEG.DE): Quantifying growing optionalities. We see much more to come

In our recent research (here), we concluded that stronger than anticipated returns in Alberto Gandolfi | US renewables, upside to domestic FlexGen, and the ROE at Amprion converging to Goldman Sachs Bank Europe SE - Milan peers, could push RWE’s 2031 EPS target to c.€5.50 from the current €4.55, a +20% branch

boost. During the H1 analyst call, management disclosed further optionalities, which Mafalda Pombeiro | could potentially lift 2031 EPS goals above €6.00, we estimate. Although this might Goldman Sachs International be a gradual process – we do not expect the company to upgrade this all at once – we believe the coming 18-24 months are likely to provide meaningful tailwinds. We Dhwani Khenwar | also note that two datacenter deals (as per management), combined with the Goldman Sachs India SPL prospect of an incremental 5% stake in Amprion (a scenario consistent with management statements, as we have previously discussed) could add, per se, +c.€2/share of incremental value. All of this would move RWE in a different (and much higher) valuation range, in our view. We remain Buy rated.

We recently presented three main sources of upside: +c.20% upside risk to RWE’s 2031 targets. In our recent research (here), we stated that we see +c.20% upside risk to 2031 EPS goals (from €4.55 to nearly €5.50), thanks to three sources of upside: (1) the outlook on renewable returns appears supportive, with RWE currently achieving c.10% IRRs, or +150 bp above guidance. This could lift 2031 profits by +€200-250 mn before taxes; (2) in FlexGen, the German government is due to host a tender to award a multi-year capacity payment (September). We estimate this too could add around +€170 mn to the bottom line, or +c.€20 cents to 2031E EPS, implying significant further upside risk to consensus; (3) the ROE assumptions on Amprion appear overly conservative: we estimate that a convergence to peers could add c.€200-400 mn for RWE.

RWE disclosed further optionalities: 2031 EPS could exceed €6.00. During the analyst call, management disclosed further sources of growth, including: (1) capacity auctions in Germany and Netherlands, which over 2027-29 could add €300-400 mn to pre-tax profits – as per management guidance, (2) the ability to develop up to 3 GW of new gas plants in the United States: we estimate that this could add at least €300-350 mn before taxes, and (3) the recently awarded US LNG deal (in exchange for the US seabeds) would add incremental profits – potentially c.€100-150 mn pa before taxes. We estimate these optionalites, once taxed, could add up to €75 cents of earnings per share.

Datacenters and incremental Amprion stakes could add +c.€2/share. Management stated that, over the coming month, RWE could complete two DC deals; adopting similar economics to the UK deal announced in November last year,

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two DC deals could add €0.5 bn of value, or c.€0.65/share of value. Acquiring an incremental 5% stake in Amprion (at the same valuation of the recently acquired stakes, i.e., +7% premium to 2027 RAB) could add roughly +€1.25/share of value (as per our analysis here), on our estimates, assuming a scenario where the value of Amprion broadly converged to its listed peer, Elia.

Valuation methodology. Our 12-month price target is €71. Our price target is based: (1) 2/3 on our 2027E SOTP of €75.9/sh. We value the FlexGen business at a target valuation multiple of 8x and the renewables business using a DCF, based on a WACC of 6.1% and on capacity additions until 2035 with no terminal value; and, (2) 1/3 on the value…