German giants Eon and RWE strike major deal, move closer together

Households could face higher bills as a £38billion merger of two giant power companies threatens to overhaul the UK energy market

Households could face higher bills as a £38billion merger of two giant power companies threatens to overhaul the UK energy market

As per the deal, RWE's 76.8% stake in innogy is valued with EUR40.00 per share including the expected dividends of EUR3.24 per share in total for 2017 and 2018, which RWE would still receive until the expected closing of the transaction.

Plans to carve up Innogy (IGY.DE) between parent RWE (RWEG.DE) and rival German utility E.ON (EONGn.DE) drove its shares sharply higher on Monday, lifting the combined value of the three German energy firms by 5.7 billion euros ($7 billion). In particular, antitrust and regulatory approvals would be necessary, the companies said.

Germany's cartel office said it was too early to comment on possible hurdles in the planned asset swap deal.

And the deal could see the creation of a new European renewables giant.

In addition, RWE will - after E.ON has gained control over innogy - get substantially all of E.ONs renewables business including the economic benefits as of January 1, 2018. RWE's transformation, however, may prove more challenging than E.ON's, particularly given renewables remain subject to huge price pressures.

German energy group Eon is buying rival Innogy which includes the firm’s UK subsidiary Npower. Eon already supplies around 4.6million customers in the UK while Npower also supplies around 4.6million

If approved, the deal would spell the end for Innogy as a standalone company. The company, in turmoil since former Chief Executive Peter Terium resigned in December, on Monday announced plans to cut 400 million euros in costs through the end of 2020.

Eon would then focus on energy networks and retail, with RWE more generation focused.

Furthermore, E.ON would transfer to RWE the minority interests in RWE-operated German nuclear power plants, the innogy gas storage business and its stakes in the Austrian utility Kelag, the statement said.

Today saw the publication of innogy's full-year results for 2017, reporting a 9% increase in net income to more than €1.2 billion.

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