EON seeks takeover of RWE's Innogy for US$25b
German energy giant EON plans to take over Innogy, the renewables subsidiary of competitor RWE, in a complex deal valued at around 20 billion euros (US$25 billion), both companies said yesterday.
The in-principle agreement involving asset swaps is part of a major restructuring of Germany’s energy market as Europe’s top economy switches from conventional to renewable power.
The aim is for EON to focus on the retail, energy networks and customer solutions business, while RWE would take over the renewables power generation of both companies.
Chancellor Angela Merkel’s decision to phase out nuclear power after Japan’s Fukushima nuclear disaster of 2011, and her government’s focus on raising “clean” energy output have pressured profits and forced utilities to radically restructure in order to remain viable.
RWE plans to sell its 76.8 percent stake in Innogy to EON in a deal that includes “a far-reaching exchange of assets and participation,” said EON, which also plans a cash offer to the remaining Innogy shareholders.
RWE would, in turn, gain an effective participation of 16.67 percent in EON.
EON would also transfer to RWE most of its renewables business and the minority interests held by its subsidiary PreussenElektra in two RWE-operated nuclear power plants.
RWE would receive the Innogy renewables and gas storage business and Innogy’s stakes in the Austrian energy supplier Kelag.
The deal, still subject to antitrust clearances, would also see RWE make a cash payment of 1.5 billion euros to EON.
Following approval of both companies’ boards, the deal was expected to be signed shortly, said EON.
Innogy, a network, renewable and retail energy utility, has been in turmoil since Chief Executive Peter Terium resigned in December and Chief Financial Officer Bernhard Guenther fell victim to a recent acid attack.
It has also has been the target of persistent takeover speculation, with sources saying recently that RWE had talked to France’s Engie and Italy’s Enel about a possible asset-swap deal.
Business daily Handelsblatt said that “for decades EON and RWE were bitter rivals. Now they have agreed on a spectacular deal that will shake up the European energy market.”
Under the country’s “energy transition,” Germany has raised the share of solar, wind and other renewables to about one third of electricity production.
As wholesale power prices have dropped, the big utilities have been forced into an ongoing process of restructuring.