EON to cut 5,000 jobs in Innogy takeover deal
Move marks biggest shakeup in Germany’s energy business in years
BERLIN: EON SE will shed as many as 5,000 jobs in the deal to take over Innogy SE, a move that marks the biggest shakeup in Germany’s energy business in years.
The transaction agreed with its rival RWE AG values Innogy at
22bil (US$27.1bil) and will sharpen the focus of Germany’s leading two electricity and natural gas providers, according to a joint statement.
EON billed itself as the first formerly-integrated utility to focus entirely on meeting needs of 50 million customers across Europe. RWE said it didn’t expect any net job losses.
EON targets savings of 600mil to 800mil by 2022. It would become a grid manager and power provider focused on meeting Chancellor Angela Merkel’s ambitious targets to cut pollution.
For RWE, which is Europe’s biggest generator of electricity, the deal would provide it with renewables as an alternative to its current generation network that now is focused mainly on coal and nuclear power.
“This strategic exchange of businesses will create two highly focused companies,” EON chief executive officer Johannes Teyssen said in the statement.
RWE CEO Rolf Martin Schmitz said “size is crucial” to exploit business opportunities as clean energy subsidies disappeared and that conventional power assets would become “the beating heart of any future-proofed industrial society.”
Merkel is seeking to phase out coal-fired power generation in Germany and wants to deliver a plan by the end of this year. RWE owns half of the nation’s coal-fired power capacity.
“The new RWE and EON entities provide investors with clearer differentiated opportunities,” Jonas Rooze, an analyst at Bloomberg New Energy Finance, wrote in a note to clients.
“Investors can take stakes in RWE if they want power generation exposure, and in EON for distribution and retail exposure.”
EON’s voluntary takeover offer for Innogy would probably be completed by the middle of 2019, the companies said.
RWE may take control of EON’s renewable energy assets by the end of 2019, when the full transaction is due to close subject to approval from antitrust authorities.
RWE will end up with EON’s renewables business, minority stakes in two nuclear power plants, Innogy’s gas storage business and a stake in an Austrian energy supplier. Including the asset swaps, the whole transaction has an enterprise value of about 60bil. — Bloomberg