Valuation Methodology: We base our price target on a sum-of-the-parts valuation. Our DCF valuations of the key divisions use projected 2024-30E free cash flows, taking into account a terminal value based on normalised cash flows. We use a WACC of 6.5%. In the case of the conventional power generation assets, however, we model these activities until the end of their respective asset lives without a terminal value. Our 2026E achieved wholesale power prices reflect an assumed normalisation of current high commodity prices, particularly European gas prices. This is highlighted as we reflect a long-term achieved German wholesale power price from 2026E of €75/MWh (flat, real). We also include a valuation allowance for RWE's future renewables growth pipeline following the updated targets the company provided at the CMD from 28 Nov 2023.

Risks which May Impede the Achievement of the Barclays Research Price Target: A key risk factor relates to the impact of Germany's planned exit from coal, which might impact RWE more negatively than expected despite having reached an agreement with the government on compensation. An inability to compete successfully in RWE's markets may harm its business. This could be the result of many factors, which may include geographic mix and the introduction of improved products or services from competitors. RWE's operations may be materially affected by global economic conditions including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices.