RWE to acquire Eon's renewables business

Toby Graves
March 13, 2018

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 German energy giants confirmed an agreement has been reached, subject to board approval, after reports over the weekend revealed a complex cash, shares, and assets deal was under negotiation.

With the exchange of shares, the two companies practically share the market.

The total would still be small in operating terms compared to the giants of southern Europe, who were quicker off the mark in building large-scale worldwide renewables fleets than their German counterparts.

Eon will receive RWE's 76.8% stake in Innogy.

Innogy and E.ON have large overlapping retail businesses in Germany and Britain. RWE would also acquire "substantially all of" E.on's renewables operations, including the economic benefits as of the start of this year, and it would keep Innogy's renewables and gas storage businesses, and the latter's interest in Austrian utility Kelag.

"A win-win?" Morgan Stanley suggested in a note, reiterating its "in-line" view of the industry.

This move would transform both companies, giving RWE a combined share in wind power second only to Iberdrola in Europe, and giving E.ON a share of the retail market that could raise antitrust implications in Germany, where the two companies are already dominant players, and in the United Kingdom, where they are two of the six biggest retailers.

Innogy, in turmoil since former Chief Executive Peter Terium resigned in December, on Monday said controllable costs would be slashed by about 400 million euros ($499 million) through the end of 2020.

Innogy reported a 3 percent rise in 2017 adjusted operating profit and said it would propose a dividend of 1.60 euros per share for 2017, unchanged from a year earlier.

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