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E.ON sees job cuts, synergies in German utilities shake-up

E.ON sees job cuts, synergies in German utilities shake-up


ESSEN, GermanyΒ  – German energy firm E.ON said on Monday it expects as many as 5,000 job cuts and up to 800 million euros ($987 million) of synergies as part of an asset swap with peer RWE involving its renewables and network arm Innogy.

Plans to break up Innogy and divide its assets between parent RWE and E.ON, first announced a day earlier, added 4.3 billion euros to the market value of Germany’s three largest utilities in the sector’s largest overhaul in recent history.

Germany’s power companies are reshaping as they look to boost green energy output, shift away from fossil fuels and prepare for Germany’s exit from nuclear power in 2022.

β€œThis strategic exchange of businesses will create two highly focused companies that will shape a better future for Europe’s energy landscape,” E.ON Chief Executive Johannes Teyssen said in a statement.

β€œEach company will have a stronger entrepreneurial core.”

The changes will turn RWE into Europe’s third-largest renewable player and at the same time create one of the continent’s top grid and energy retail groups under the aegis of E.ON, with about 50 million customers across the continent.

β€œOverall, we view the planned transaction between RWE AG and E.ON SE as positive, from a strategic as well as a financial point of view,” municipal shareholders in RWE, which together hold about 23 percent in the group, said.

β€œWe think that this transaction gives significant thrust to the successful implementation of Germany’s energy shift.”

Before striking a deal with E.ON, RWE held talks with European peers Enel and Engie and came close to a deal with Spain’s Iberdrola before Christmas, people familiar with the matter said.

Shares in Innogy closed up 12.1 percent at 38.70 euros after Sunday’s proposed deal from RWE and E.ON, which plans to offer Innogy’s minority shareholders 40 euros per share, or 5.2 billion euros, a 16 percent premium to Friday’s close.

Two bankers who have worked on previous Innogy deals put the chances of a rival bid for the German energy company asβ€œvery low” toβ€œzero”, since RWE has already explored alternative deals with other candidates.

RWE is being advised by Bank of America Merrill Lynch and Citi on the deal, E.ON has hired Perella Weinberg Partners and BNP. Goldman Sachs is working for Innogy, sources said. The deal is expected to close in late 2019.

n a letter to staff seen by Reuters, Innogy interim Chief Executive Uwe Tigges said Innogy’s management and supervisory boards would thoroughly assess the planned deal, which was agreed in principle and still requires antitrust approval.

β€œWe assure you that the interests of the employees of our company as well as those of our shareholders continue to be our primary focus,” said Tigges, who has been in the role for only three months.

Innogy, which reported its annual results on Monday, said that it had so far not reflected on the proposal and would comment at a later stage.

Frank Bsirske, head of the Verdi labor union and deputy chairman of RWE’s supervisory board, welcomed the deal, saying it offered good prospects for growth and jobs. The supervisory boards of both RWE and E.ON have approved the transaction.

Germany’s cartel office said it was too early to comment on possible hurdles in the planned asset swap deal, which is expected to involve German and European antitrust regulators.

Innogy and E.ON have large overlapping retail businesses in Germany, Britain and the Czech Republic. E.ON said it expects 600-800 million euros in annual synergies by 2022.

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. Their proposed transaction comes just two years after RWE spun off its renewable, retail and network operations to form Innogy and E.ON split off some of its business to create Uniper.

Source: Reuters
Anand Gupta Editor - EQ Int'l Media Network


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