E.On and RWE are Reshaping the German Electricity Market

Two of Germany`s biggest utility companies, E.On and RWE, yesterday announced plans to restructure their assets. Germany`s electricity market is liberalized, but still dominated by four big oligopolistic companies. Two of the four companies are now going to coordinate their activities even more to create monopoly-like structures in particular areas. According to the plans, RWE is only focussing on electricity production in the future, whereas E.On is going to deal only with electricity transmission and distribution as well as end-user supplies and will cease its electricity generation activities. The plans still need to be approved by European competition authorities and the German Federal Cartel Office. German municipalities reported to be highly sceptical of the deal.

The deal would create a merger between two long-standing competitors in the German energy market. The companies are justifying the deal with pressures that the German Energiewende created for their business models. According to the plans, RWE is going to concentrate the renewable energy businesses of both companies under their roof. The sub-company Innogy, which was only created two years ago, shall be dismantled and partly sold off to E.On. This and other steps in the complicated deal are alleged to be necessary to keep competitive advantages and  to create synergies of up to 500 million Euros, according to news outlet reuters.

About 20 per cent of RWE shares are currently held by German municipalities, which are reported to be highly sceptical of the deal. The biggest of these municipal shareholders, the Dortmunder Stadtwerke DSW21, explained they would look very closely into the details of the deal and will be difficult to convince, according to the German newspaper Handelsblatt.
Further information in German are available here.


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