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RWE is expecting a smooth ride in its plans to become a renewable energy behemoth by acquiring the assets of E.ON and Innogy, as reported this week.
The deal will involve the breakup of Innogy, an RWE subsidiary that was set up two years ago to hold RWE’s renewable assets, along with its networks and retail operations.
Essen-based RWE, the biggest electricity provider in Germany, is expecting European Union bureaucrats will grant it unconditional antitrust approval to take back Innogy’s renewables businesses and exchange the rest of the company for assets held by E.ON, Reuters reported Thursday.
E.ON, also based in Essen, is set to walk away with Innogy’s regulated energy networks and customer operations assets. European Union approval of E.ON’s side of the deal is expected on March 7, according to reports.
RWE will also take a 16.7 percent stake in E.ON, in a transaction which has yet to be approved by competition-monitoring bodies in Germany and the U.K. However, RWE will need to gain separate federal regulatory approval to purchase E.ON assets in the U.S.
RWE spokesperson Regina Wolter told GTM that her company had submitted European transaction documents to the EU authorities on Jan. 22.
“We do not see any antitrust hurdles in the acquisition of E.ON's renewables business because the increase in market share will not affect competition,” she said, while declining to comment further on the proceedings.
Becoming the third-largest renewable energy provider in Europe
RWE and E.ON first went public on the asset swap plans in March of last year. The companies agreed that RWE would transfer its entire stake of 76.8 percent in Innogy to E.ON.
RWE, meanwhile, would receive practically all of E.ON’s and Innogy’s renewable generation plus a 16.67 percent stake in the enlarged E.ON and certain other assets, according to a press release. Finally, E.ON will get €1.5 billion ($1.7 billion) in cash from RWE.
E.ON said the deal would turn it “into a highly focused provider of European energy networks and state-of-the-art customer solutions, ideally positioned to drive Europe’s energy transition by innovation.”
RWE, meanwhile, would become a leading European renewable energy producer with “attractive growth potential, optimally combined with security of supply through its conventional power plants and energy trading,” the companies said last year.
If the deal goes ahead according to plan, as seems likely, then Reuters said it would make RWE the third-largest renewable energy provider in Europe, after Iberdrola in Spain and Enel in Italy.
Current figures for the European generation capacities of all three companies are not easy to come by. Innogy had 3.5 gigawatts of renewable energy installed across Europe at the end of June 2018, of which 54 percent was in onshore wind. A further 31 percent was in offshore wind, and almost all of the remainder was in hydro generation.
E.ON data from 2018, meanwhile, shows the company owning around 4 gigawatts of renewables in America and 3 gigawatts in Europe, with another gigawatt under construction.
Add that to around 2.6 gigawatts of hydro and a small amount of biomass generation operated by RWE, and RWE’s renewable energy portfolio could come to over 14 gigawatts worldwide and 10 gigawatts within Europe, if the deal goes through.
For comparison, Iberdrola claimed more than 29 gigawatts of renewable plant capacity in the last quarter of 2018, and Enel boasts 43 gigawatts of renewable capacity, although much of that is outside Europe.
A unique win-win
Last year, Wood Mackenzie Power & Renewables analyst Luke Lewandowski estimated E.ON and RWE’s combined wind assets would put RWE just behind Iberdrola in terms of overall share in the Europe and Middle East market.
Whichever way you split the cake, the fact remains that RWE and E.ON appear to have brokered a unique win-win in the European energy space. The asset split should allow both companies to grow without stepping on each other’s toes.
RWE will be able to refocus its generation efforts away from coal, which is being phased out in Germany, and look to become Germany’s leading renewable energy brand in Europe.
E.ON, meanwhile, can concentrate on evolving into a customer-focused energy services provider for the digital age, building on initiatives such as its recent strategic partnership with the fleet management firm ALD Automotive.