Revamping deal between RWE and Eon

The two largest German utility companies no longer aim to compete against each other.

Revamping deal between RWE and Eon

Essen (dpa) - German energy giants Eon and RWE see their plans to reorganize business operations as a way to strengthen Germany as an energy location, the companies' chief executives said on Tuesday at a joint press conference.

Eon chairman Johannes Teyssen and RWE chief Rolf Martin Schmitz met the press to discuss the plans revealed at the weekend and on Monday for Eon to ultimately take over a large stake in utility company RWE's subsidiary Innogy in exchange for a range of assets from Eon's renewable energy business.

"We are convinced that, in the interest of all customers and in the interest of a more secure and sustained supply, the German and European energy transition can be more successfully achieved with this new arrangement than under the current organization," Teyssen said in Essen.

Under their future arrangement, the two largest German utility companies no longer aim to compete against each other. Eon will no longer produce electricity and instead concentrate on operating energy networks and selling electricity to end-users.

Meanwhile RWE, which until now has solely operated conventional power plants, is to take over completely the field of renewable energy. This move would require breaking up RWE's network business and green energy subsidiary Innogy.

Teyssen said that companies that aimed to compete worldwide needed "a clearly larger and more international positioning than previously." The Eon-RWE deal would achieve this, he said.

Eon foresees yearly savings of 600 million to 800 million euros (740 million-986 million dollars) from 2022 onwards from the deal. Under initial projections, some 5,000 jobs would be trimmed at the revamped company which would then have well over 70,000 employees. RWE does not foresee any payroll reductions in the years ahead.

Meanwhile RWE reported Tuesday that it returned to the black in 2017 with a net profit of 1.9 billion euros, turning around from the 5.7 billion euros in losses the year before. Last year's earnings were boosted by the return of taxes on its nuclear power operations. Adjusted for that factor, RWE's earnings were 1.2 billion euros.

For this year, however, RWE said it expected earnings to drop to between 700 million and 1 billion euros, with the company to embark on its planned revamping and the breakup of the Innogy subsidiary.