Business, Europe

German utility giants RWE, E.ON to merge

Handshake

An intricate merger between German utilities E.ON and RWE looks to position the latter one of Europe’s leaders in renewable energy production.

Per terms announced by the companies yesterday, the deal will be executed in several steps, beginning with E.ON’s acquisition of RWE’s 76.8% majority share Innogy — a renewables-focused RWE subsidiary established in 2015.

E.ON will then give both Innogy‘s and its own renewable assets — or about 16.7% of its total equity — to RWE. E.ON will also pay RWE about US$1.9 billion.

RWE will become a broadly diversified power producer optimally complementing a large portfolio of renewable assets with its conventional energy generation and linking the two with its existing trading platform,” the companies said in a release. “This set-up will enable RWE to generate sustainable, profitable growth.”

E.ON, meanwhile, will shift its focus to “intelligent networks and customer solutions.”

The move is a response to restructuring in Germany’s energy market, which has favored renewables since Chancellor Angela Merkel steered the country away from nuclear generation after the 2011 Fukushima incident in Japan.

The transaction is expected to be completed by the end of 2019, until which time E.ON, RWE and Innogy will remain separate entities.

Following the deal’s closing, RWE will be the third-largest generator of renewable energy in Europe, with a fleet including hydroelectric power, solar, and onshore and offshore wind.

E.ON had operated close to 60 GW-worth of hydropower projects before establishing an independent company called Uniper on Jan. 1, 2016, that assumed responsibility for its hydro, natural gas and coal facilities.

E.ON has since sold all but a 47% share in Uniper, though it is unclear if any of these minority shares will be included as terms of the merger.

Meanwhile, RWE, via Innogy, has a 500 MW fleet of hydropower projects spread across Europe.