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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

German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.

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