Germany's E.ON and RWE Agree $74 Billion Asset Swap

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The ongoing upheaval in Germany's energy sector is about to undergo its biggest twist to date as Germany's largest power player E.ON SE (FWB:EOAN) (Düsseldorf) has agreed in principle with rival RWE AG (FWB:RWE) (Essen, Germany) to acquire RWE's 76.8% stake in innogy SE, the company's spun-off renewable energy business.

However, as part of a complex asset swap deal valued at roughly 60 billion euro ($73.8 billion), E.ON will hand back innogy's renewable energy and gas storage assets to RWE alongside its own renewables business and the minority interests currently held by E.ON's subsidiary PreussenElektra in the RWE-operated nuclear power plants Emsland and Gundremmingen. This will result in E.ON becoming Europe's largest grid operator, while also focusing on the retail sector while RWE's new renewable assets will make it the second-largest green energy company in Europe. Very little cash will be exchanged in the deal, but RWE has agreed to pay 1.5 billion euro ($1.8 billion) to E.ON while receiving shares equal to more than 16% in the new E.ON.

"After successful implementation of the transaction, it is intended to fully integrate innogy into the E.ON Group," E.ON stated. "Through this transaction E.ON would become a focused customer-oriented energy company concentrating on energy networks and customer solutions. The renewables businesses of E.ON and RWE would be brought together under the umbrella of RWE. It is planned to implement the transaction in several steps, and it is subject to customary antitrust clearances."

RWE stated: "Following completion of the transaction, RWE would combine ownership of the renewables businesses of E.ON and innogy to create a leading European utility for renewables and security of supply with a broadly diversified portfolio of renewable and conventional generation assets, which would be linked via our existing trading business."

RWE spun off the more profitable innogy business in late 2016, Germany's biggest public listing in 16 years. At the time, Industrial Info reported that that the new company was valued at 20 billion euro ($22.4 billion). For additional information, see October 17, 2016, article - RWE Spins-Off 'innogy' in $22 Billion Listing.

In January, RWE announced a restructuring of its conventional power generation business and revealed that cuts would be made at innogy following a profit warning in December. For additional information, see January 8, 2018, article - RWE Restructures Power Generation Business.

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