SHARE
COPY LINK

ENERGY

Energy giant EON to cut 5,000 jobs as part of huge takeover deal

German utility EON on Monday said it plans to cut up to 5,000 jobs as part of its takeover of the renewables unit Innogy from rival RWE, in a deal that will redraw the country's energy landscape.

Energy giant EON to cut 5,000 jobs as part of huge takeover deal
Photo: DPA

In a joint statement, EON and RWE said they planned to complete their asset swap transaction, which surprised investors when it was unveiled this weekend, “by the end of 2019”.

EON said it expects the Innogy takeover to generate some 600 to 800 million euros in savings annually from 2022, but warned that the “integration process” will lead to “a reduction of a maximum of 5,000 jobs” out of a total of around 70,000 jobs.

“At the same time, EON anticipates to create thousands of new jobs in the coming decade,” the statement added.

The ultimate goal of the transaction is to allow EON to focus on retail customers and on managing energy networks, essentially buying and selling electricity, while RWE will specialise in generating power from fossil fuels and renewables.

The complicated arrangement comes amid huge upheaval in the sector as Europe's top economy switches from conventional to renewable power under the government's so-called “Energiewende” or “energy transition”.

The deal would first see EON acquire RWE's 76.8 percent stake in Innogy, valuing the clean-energy spin-off at some 22 billion euros.

Pending the green light from financial regulators, EON then intends to make a voluntary takeover offer to Innogy's minority shareholders from “early May”, offering 40 euros per share.

RWE for its part would gain an effective participation of 16.67 percent in EON – turning the one-time competitor into EON's largest shareholder.

The next step of the deal would see RWE take control of EON's renewables business, including Innogy's renewables, its gas storage business, its stake in Austrian energy supplier Kelaq and EON's minority stakes in two nuclear power plants.

In return, RWE will make a cash payment of 1.5 billion euros to EON.

Innogy's energy networks and customer base would remain with EON.

The transaction is still subject to regulatory approval.

The deal would make RWE “a leading European electricity producer,” according to the statement, as the firm becomes Europe's third-largest renewables producer while also hanging on to gas and coal-fired power plants to ensure “security of supply” despite their harmful impact on the environment.

EON meanwhile said it would “focus entirely on meeting the demands of its around 50 million customers across Europe”, and pledged to look into novel climate protection solutions — such as the faster roll-out of charging stations for electric cars.

Merkel welcomes deal

Chancellor Angela Merkel welcomed the companies' manoeuvres earlier Monday, saying she was “confident” both EON and RWE were working to find “the best ways” to assure “the supply of sustainable energy” and respond to the country's energy shift.

Germany's energy market has been rapidly transformed since Merkel announced a phase-out of nuclear power after Japan's 2011 Fukushima disaster.

Under the “energy transition”, Germany has raised the share of solar, wind and other renewables to about one third of electricity production.

As wholesale power prices have dropped, the big utilities have been forced into major restructuring.

In response to those challenges, EON spun off its fossil fuel operations and invested heavily in renewables, while RWE remains the biggest power producer and still operates major coal-fired plants.

In a separate statement Monday, EON unveiled its 2017 financial results, which showed adjusted net profits jumping 58 percent year-on-year to 1.4 billion euros.

Operating, or underlying, profit came in at 3.1 billion euros, while EON was also able to trim its massive debt from 19.7 billion last October to 19.2 billion euros.

RWE is due to announce its results on Tuesday.

ENERGY

Sweden to stop local governments blocking wind parks in final stages

Sweden's government has proposed a new law which will remove local municipalities' power to block wind parks in the final stages of the planning process, as part of a four-point plan to speed up the expansion of wind power.

Sweden to stop local governments blocking wind parks in final stages

“We are doing this to meet the increased need for electricity which is going to come as a result of our green industrial revolution,” Strandhäll said at a press conference. 

“It is important to strengthen Sweden by rapidly breaking our dependence on fossil fuels, building out our energy production and restructuring our industry. The Swedish people should not be dependent on countries like Russia to drive their cars or warm their homes.”

“We are going to make sure that municipalities who say “yes” to wind power get increased benefits,” she added in a press statement. “In addition, we are going to increase the speed with which wind power is built far offshore, which can generally neither be seen or heard from land.” 

While municipalities will retain a veto over wind power projects on their territory under the proposed new law, they will have to take their decision earlier in the planning process to prevent wind power developers wasting time and effort obtaining approvals only for the local government to block projects at the final stags. 

“For the local area, it’s mostly about making sure that those who feel that new wind parks noticeably affect their living environment also feel that they see positive impacts on their surroundings as a result of their establishment,” Strandhäll said.  “That might be a new sports field, an improved community hall, or other measures that might make live easier and better in places where wind power is established.” 

According to a report from the Swedish Energy Agency, about half of the wind projects planned since 2014 have managed to get approval. But in recent years opposition has been growing, with the opposition Moderate, Swedish Democrats, and Christian Democrat parties increasingly opposing projects at a municipal level. 

Municipalities frequently block wind park projects right at the end of the planning process following grassroots local campaigns. 

The government a month ago sent a committee report, or remiss, to the Council on Legislation, asking them to develop a law which will limit municipal vetoes to the early stages of the planning process. 

At the same time, the government is launching two inquiries. 

The first will look into what incentives could be given to municipalities to encourage them to allow wind farms on their land, which will deliver its recommendations at the end of March next year. In March, Strandhäll said that municipalities which approve wind farm projects should be given economic incentives to encourage them to accept projects on their land. 

The second will look into how to give the government more power over the approvals process for wind projects under Sweden’s environmental code. This will deliver its recommendations at the end of June next year. 

SHOW COMMENTS