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ENERGY

EON to pay €11.8 billion for Endesa assets

The German energy group EON is to pay €11.8 billion for energy assets in France, Italy and Spain as part of a deal that ended its bid for the Spanish group Endesa, EON said on Friday.

EON to pay €11.8 billion for Endesa assets
Photo: DPA

EON directors “approved the acquisition of a substantial package comprising power stations and other shareholdings above all in Spain, France and Italy,” a statement said.

The German group is to pay €8.9 billion directly and take on debt currently estimated at around €2.9 billion.

It saw the “extensive transaction as a constructive way of ending the dispute over the acquisition of a majority interes in the Spanish energy company Endesa.”

The Italian power group Enel and Spanish firm Acciona were also involved in the deal.

EON dropped its bid for Endesa in April 2007 following a battle of more than one year against Spanish government opposition, in exchange for an agreement that allowed the German firm to buy major assets in return.

The EON statement quoted chief executive Wulf Bernotat as saying: “With this transaction we are considerably expanding our position in Spain, where we are already strong in the wind power market, and Italy.”

He added that “EON now has an international presence unmatched by any other energy company, thus obtaining an even better platform for further profitable growth in Europe.”

In Madrid, Endesa said Friday in a statement that it would make a pre-tax capital gain of €4.5 billion on the transaction.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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