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Elliott calls for RWE to increase its share buybacks by a'significant amount'

Elliott calls for RWE to increase its share buybacks by a'significant amount'

Elliott, an activist investor, disclosed on Monday that he owned a stake in Germany's largest utility RWE of about 5% and called for it to increase its share-buyback program worth 1.5 billion euros ($1.6 billion).

This is the first confirmation that Elliott – known for its high-profile campaigns with some of the biggest companies in the world, including BP – has a stake in RWE.

Elliott, which has assets worth around $72.7 billion globally, also owns stakes in German companies such as Thyssenkrupp Uniper Bayer, SAP, and Bayer.

RWE shares grew 2.3%. This was one of the largest gains among German blue chips. A 5% stake is valued at approximately 1.24 billion euro.

The company cut its investment program by 10 billion euro, or by more than a half, by 2030 and set more aggressive return targets for their projects. Elliott welcomed this move.

These measures are an important step in a more disciplined approach to capital allocation. We share the disappointment of the market with regard to the lack clarity in the company's commitment towards enhancing shareholder returns", the investor stated in a press release.

The company said that "given the announced reduction in capex and RWE's persisting undervaluation we believe there is an opportunity to accelerate and significantly increase the current share buyback program."

RWE's choice to reduce investment, but not to increase its buyback program, has already been criticized by Morningstar, Jefferies and Enkraft Capital. Enkraft Capital is a longtime critic of RWE.

RWE, like other companies in the sector is facing pressure due to lower returns, a less sure outlook for renewables, and the U.S. president Donald Trump. This has raised concerns about the company's "going green" strategy.

The company is now being haunted by the management's unwillingness to develop and implement a strategy that would enhance its value. "The pressure on management is going to continue from now on", said Benedikt Komaier, Enkraft's managing director.

He said that the company did not have a strategy focused on its core strengths in European energy generation and value.

RWE stated that it is in constant communication with its investors including Elliott and will provide further details about its capital allocation in the first quarter of next year, when it has more clarity regarding investments in Germany or the United States.

When pressed about the matter during a earnings call last weekend, Chief Executive Markus Krebber said that the group would buy back additional shares if they needed to make a decision on capital allocation now.

(source: Reuters)