Published: Tue, March 13, 2018
Economy | By Melissa Porter

German E.ON, RWE agree Innogy deal with major restructuring

German E.ON, RWE agree Innogy deal with major restructuring

Further, RWE will receive the minority interests now held by E.ON's subsidiary PreussenElektra in the RWE-operated nuclear power plants Gundremmingen and Emsland.

Plans to carve up Innogy IGY.DE between parent RWE RWEG.DE and fellow utility E.ON EONGn.DE are unlikely to be disrupted by rival bidders due to the complexity of the planned transaction, people close to the matter said.

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. Innogy had been an investment target of interest for other European utilities including Engie, Enel and Iberdrola.

RWE and E.ON are making these massive reorganizations faced with the rise of wind and solar power in Germany and across Europe, which has undercut the markets and profits for fossil fuels and nuclear power plants.

Under the agreement, Eon would receive RWE's 76.8% stake in innogy in return for granting RWE an effective participation of 16.67% in Eon SE. One source said Australia's Macquarie MQG.AX had also been in the race.

"We think that this transaction gives significant thrust to the successful implementation of Germany's energy shift".

The Fukushima meltdown disaster in Japan prompted German Chancellor Angela Merkel to move to shut down the country's nuclear power fleet by decade's end. However, the deal still needs the approval of each company's supervisory board.

Analysts at Jefferies said while helping E.ON achieve scale and efficiencies in networks and retail, and transforming RWE into a leading renewables and security of supply provider, a deal "would involve another two years in costly restructuring". It has been in turmoil since former Chief Executive Peter Terium resigned in December and on Monday said it would cut 400 million euros in costs through the end of 2020.

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