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


By and Tom Käckenhoff

ESSEN/DUESSELDORF (Reuters) - Germany's top utilities announced a multi-billion-euro revamp, with agreeing to swap control of with rival for renewable assets in the sector's largest overhaul since a landmark move to exit nuclear power.

The deal, which includes making a 5.2 billion euro ($6.4 billion) takeover offer to Innogy's remaining owners, will effectively break up the network, renewables and retail firm that was carved out from in 2016.

Angela Merkel's decision to abandon nuclear power after Japan's Fukushima nuclear disaster of 2011 has forced the sector to radically restructure in order to survive and already caused major plant shutdowns and billions of euros of losses.

Peter Altmaier, the next and a close ally of Merkel, said the deal was a consequence of that shift, known as the 'Energiewende' in German. The companies had to adapt, he told the newspaper.

Through the takeover, which includes a share issue and asset swaps, will focus on prized regulated networks and customer operations, while will take on the renewables businesses of both and

That would position RWE, which relies heavily on coal and gas-fired power plants, as a champion of the shift away from fossil fuels towards a more sustainable mix of sources.


A source involved in the deal said it would be slightly more beneficial to E. ON, which would become a bigger regulated business by adding more networks, while would end up owning interests in the riskier and more competitive renewables sector.

The source said that had been in a better bargaining position after shopped to other European rivals, including France's Engie, Italy's and Spain's Iberdrola, without success.

"This looks like an advantageous step for at first glance," said Thomas Deser, at Union Investment, in E. ON, and

"Through the renewable pipeline, RWE, too, should be able to offset its dwindling nuclear and lignite business as well as attract partners for the expansion of its wind business."

The all-German transaction comes less than two years after and both split up their businesses to separate legacy fossil fuel power plants from more promising networks and renewable assets.

in January agreed to sell a remaining 46.65 percent stake in its power plant and trading unit Uniper, which it spun off in 2016, to Finland's Fortum, a deal expected to close later this year.

The RWE-

swap will also hand - Germany's biggest - a 16.67 percent stake in by way of a 20 percent capital increase. will pay another 1.5 billion euros to to close a valuation gap that results from the complex structure of the asset swaps.

The transactions, which still require approval from the company's boards, face scrutiny by regulators as well as from Germany's Federal Cartel Office, which did not respond to an emailed request for comment.

The declined to comment.

Innogy, in which owns 76.8 percent, has been in turmoil since resigned in December in the wake of a profit warning and fell victim to a recent acid attack.


has been the target of persistent takeover talk, with sources saying recently that had talked to and Italy's about a possible asset-swap deal. Other firms linked to included and Australian Macquarie, an acquisitive infrastructure investor.

reports its annual results on Monday, while does so on Tuesday and on Wednesday. The supervisory boards of both and were due to meet on Sunday to review the deal, according to people familiar with the matter.

municipal shareholders, VkA, which jointly hold about 23 percent in the group, were caught off-guard by the announcement and said the plans would have to be thoroughly examined.

If approved, the deal could result in synergies of about 500 million euros, analysts at estimate, pointing to double-staffing on the customer support side.

Under the proposed transaction, would make a voluntary cash offer to buy stake valued at 40.00 euros per share, said in a filing issued early on Sunday. shares closed at 34.53 euros on Friday.

This price includes an offer of 36.76 euros per share plus assumed dividends of SE for the fiscal years 2017 and 2018 in the total aggregate amount of 3.24 euros per share, said. will not participate in the offer.

also agreed to transfer most of its renewables business to RWE, including minority interests currently held by E. ON's subsidiary in the RWE-operated nuclear power plants Emsland and Gundremmingen.

in turn, will receive Innogy's renewables and business as well as Innogy's stake in Austrian supplier Kelag, said.

($1 = 0.8127 euros)

(Additional reporting by Matthias Inverardi in Duesseldorf, Michael Nienaber in Berlin, Alissa de Carbonnel in Brussels and Edward Taylor, Vera Eckert and Douglas Busvine in Frankfurt; Editing by Louise Heavens)

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

First Published: Sun, March 11 2018. 23:29 IST