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E.ON, RWE get fresh boost from dividend, profit outlook

Reuters  |  ESSEN, Germany 

By Christoph and Tom Käckenhoff

ESSEN, (Reuters) - German groups and on Tuesday fleshed out their plans to break up business, forecasting higher profits and dividends as a result of a more focused structure.

forecast annual operating profit to rise by an average 3 to 4 percent over the next three years, while flagged a bigger than expected dividend for 2019, driving shares in to the top of Germany's blue-chip index.

The two companies announced plans to carve up networks, renewables and firm Innogy, in which holds a 76.8 percent stake, and divide its assets between them in a reshaping of Germany's power sector.

The deal will turn RWE, one of Europe's largest carbon dioxide emitters, into Europe's third largest after Italy's and Spain's At the same time it will create a and under roof.

"This is a transaction that only knows winners," told journalists on Tuesday, also citing a 5.2 billion euro ($6.4 billion) bid will launch for Innogy's minority shareholders in the second quarter.

"Critical mass is the key to success in the field of Before this transaction, neither nor were in such a position, he added.

However, there will be a toll in terms of lost jobs.

The transaction, expected to close late in 2019, will result in as many as 5,000 job cuts as well as the future

group targets 600-800 million euros in synergies.

"The announced job cuts ... must be cushioned, with no compulsory redundancies," said Andreas Scheidt, a member of labour union Verdi's board. Scheidt is also of supervisory board.


Shares in gained more than 4.2 percent, adding a further 820 million euros in market valuation. and both traded 0.7 percent lower, having posted bigger gains than a day earlier.

has shifted to solar and wind power after Japan's Fukushima disaster seven years ago triggered a phase-out of nuclear power, turning the coal and nuclear based business model of the country's utilities on its head.

said on Tuesday that its ordinary dividend was expected to rise to 0.70 euros per share in 2018, up from 0.50 euros in 2017, with a further increase planned in 2019, when analysts polled by had expected it to remain flat.

"The market is pricing in the deal which results in much more focused business models," a said.

Under the proposed deal will focus on Innogy's gas and power networks, raising its share of profits from regulated assets to about 80 percent from 65 percent, and giving it some 50 million European clients.

carved out and listed in 2016, hoping to extract more value from its networks and renewables assets, the most promising areas of the crisis-ridden utility sector. It has since tried to find a buyer for its stake.

E. ON, which also said its dividend would rise in 2018 as it released strong results on Monday, will keep some renewables assets in the deal, notably its 1.3 billion pound ($1.8 billion) Rampion wind park off

($1 = 0.8112 euros)

($1 = 0.7204 pounds)

(Additional reporting by Vera Eckert; Editing by Alexander Smith and Keith Weir)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 17:57 IST