RWE shares drop as Gazprom ruling brings no boost
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By Christoph Steitz
FRANKFURT | Mon Jul 1, 2013 9:14am EDT
(Reuters) - Germany's No.2 utility RWE (RWEG.DE) has doused hopes of an earnings boost following a legal ruling last week, compounding concerns about a looming profit squeeze and sending its shares to their lowest level in nearly two years.
Investors had hoped RWE would raise its full-year outlook after a court ruled Russia's Gazprom (GAZP.MM) had to base the prices it charged RWE in long-term contracts partly on spot-market rates and had to reimburse the German company for overpayments since May 2010.
But RWE on Monday said the reimbursement - which it declined to disclose - had no impact on its full-year outlook, sending its shares down 4.8 percent to their lowest level since September 2011. The stock was the biggest loser in Germany's benchmark DAX index .GDAXI.
"We think today's announcement is significant because it underscores how wrong consensus (on the company's earnings outlook) has been. We expect pressure on the shares to intensify in the coming days," UBS analyst Patrick Hummel said.
Analysts have estimated the payment from the Gazprom deal at between 300 million euros ($390 million) and 1 billion and expectations were high after main peer E.ON (EONGn.DE) had raised its outlook last year following a similar deal.