Economy

RWE, E.ON reshape German power sector in Innogy deal

RWE, E.ON reshape German power sector in Innogy deal

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.

"This looks like an advantageous step for E.ON at first glance", said Thomas Deser, fund manager at Union Investment, which holds shares in E.ON, RWE and Innogy.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 12, 2018.

The deal would give E.ON greater economies of scale in power distribution and retail and RWE in renewables, making it easier for them to cope with Germany's rapid shift to cleaner energy sources. "The CEOs of the energy companies could get nervous with this deal", the person said, adding that the deal would also potentially open up opportunities to snap up assets that RWE and E.ON have to sell to get regulatory clearance for their deal.

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RWE is being advised by Bank of America Merrill Lynch and Citi on the deal, E.ON has hired Perella Weinberg Partners and BNP.

Germany's cartel office said it was too early to comment on possible hurdles in the planned asset swap deal.

Shares in RWE, which owns 76.8 percent of Innogy, closed 9.2 percent higher while E.ON's ended the day up 5.4 percent. 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. Chief executive Peter Terium resigned late a year ago in the wake of a profit warning leaving Uwe Tigges as interim CEO.

Eon would then focus on energy networks and retail, with RWE more generation focused. Today it reported 2017 results, saying its adjusted net profit grew by 9% to more than Euro 1.22 billion.


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