RWE, E.ON reshape German power sector in Innogy deal

13 March, 2018, 10:52 | Author: Julian Swanson
  • Shares of Innogy fell 1% in 2017 their first full year on the German stock exchange. They’ve since advanced almost 6

French shares were modestly higher on Monday as strong U.S.jobs report stoked optimism about global growth and German utilities E.ON and RWE announced a major overhaul of the industry. In recent years both RWE and E.ON have sought to split their operations into forward-facing business units focused on renewables and smart grids and legacy operations holding the bulk of their fossil fuel assets.

German energy giant E.ON is planning to take over Innogy, the renewables subsidiary of domestic competitor RWE. RWE and E.ON, whose share prices collapsed over the past decade, rose 11 and 4.6 percent respectively.

Following approval by the two firms' boards, the deal is expected to be signed shortly, E.ON said.

"This looks like an advantageous step for E.ON at first glance", said Thomas Deser, fund manager at Union Investment, which holds shares in E.ON, RWE and Innogy.

However, with the help of the green energy, RWE will manage to close the nuclear plants and the challenges to the coal, as well as to find partners for the development of their wind farms.

Germany's energy landscape has been rapidly transformed since Chancellor Angela Merkel announced the complete phaseout of nuclear energy after Japan's 2011 Fukushima disaster.

Through a series of asset swaps the deal would effectively hand Eon, which operates big six supplier Eon UK, a one third stake in the new SSE-Npower rival.

Morgan Stanley analysts said the proposed deal would allow E.ON to expand its networks and retail businesses, with potential for "material" cost cuts, while RWE would gain a long-term renewables strategy and a stable dividend from E.ON.

The European Commission declined to comment.

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