German power firm Innogy boosted by latest utility shake-up

Gladys Abbott
March 13, 2018

Under the agreement in principle, E.ON will acquire RWE's 76.7% stake in innogy in a complex transaction including asset swaps, it said.

Share in Innogy, RWE, and E.ON all surged this morning as the markets responded positively to the news.

Two bankers who have worked on previous Innogy deals put the chances of a rival bid for the German energy company as "very low" to "zero", since Innogy has already explored alternative deals with other candidates.

RWE would, in turn, gain an effective participation of 16.67 percent in E.ON.

Business daily Handelsblatt said that "for decades E.ON and RWE were bitter rivals".

The deal will transform E.On into Europe's largest electricity retailer and grid operator, while RWE will become Europe's second-largest producer of renewable energy. The deal is expected to close in late 2019.

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While an agreement has been reached, closure of the transactions still require board approval on both sides and would also need to clear antitrust and regulatory approvals.

FILE PHOTO: Innogy logo in Essen, Germany, March 14, 2017.

Recent financial results have suggested the re-organisation is starting to pay off for both companies, with E.ON agreeing in January to sell a minority stake in its fossil fuel business Uniper to Finland's Fortum for €3.8bn in January.

The planned large-scale asset swap went down well with shareholders. It will also result in E.ON becoming exclusively focused on customer solutions and energy networks, with RWE acquiring E.ON's renewable energy assets.

If approved, the deal would spell the end for Innogy as a standalone company.

RWE said its plan is to combine the renewables businesses of Innogy and E.on to establish a greener utility with a broadly diversified portfolio of renewable and conventional power generation assets, which would be linked via its existing trading business.

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