RWE - E.ON Deal Partly Approved By European Commission

The European Commission has approved the acquisition by RWE of E.ON's renewable and nuclear electricity generation assets under the EU Merger Regulation. The Commission concluded that the transaction would raise no competition concerns in the European Economic Area. Both companies announced plans to re-structure the German electricity market in early 2018, as reported earlier on this blog. The transaction was notified to the Commission on 22 January 2019 and partly approved yesterday. However, this approval only applies to the assets that RWE is purchasing from Eon. The part that of the deal raising more competition law issues is the transfer of assets to Eon. This part of the deal is being assessed separately by the Commission and is still under review.



As discussed earlier on this blog, the two companies are engaged in a complex asset swap. Following this asset swap, RWE will be primarily active in upstream electricity generation and wholesale markets, whereas E.ON will focus on the distribution and retail of electricity and gas. As part of the asset swap, RWE would acquire (i) the majority of E.ON's renewable and nuclear generation assets and (ii) a 16.67% minority interest in E.ON as part payment for the assets it is selling to E.ON in the context of the asset swap, according to the European Commission.


The Commission's investigation found that the transaction is:
  • Unlikely to hinder effective competition in the generation and wholesale supply of electricity. RWE has a market share slightly above 20% (and approximately 30% in conventional power generation only), but the increment created by the transaction is very small (less than 1% overall and also less than 1% based on conventional power generation only). In addition, part of the increment would only be temporary in nature since the nuclear capacity transferred to RWE will have to be decommissioned by end of 2022, at the latest.
  • Unlikely to affect RWE's ability and incentives to influence market prices through withholding electricity supply, as the increment is too small to materially enhance RWE's incentives do so.
The Commission therefore concluded that the transaction would raise no competition concerns as RWE would continue facing effective competition after the transaction on the markets for generation and wholesale supply of electricity, and cleared the case unconditionally.





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