E.On to spin off its fossil fuel generation business

1 December 2014


E.On is to spin off the major portion of its electricity generating business as part of a new strategy designed to align its business with changing global energy markets.

The German energy giant says that its current broad, global business model is no longer sustainable because of recent dramatic changes in the energy sector driven by the growth of renewables and technology innovation.

It will spin off its fossil and nuclear power generation businesses, upstream activities and trading activities into a new company, allowing E.On to focus on renewables, distribution and customer solutions, it said.

E.On will seek a listing in 2015 for the new company, which will own 51 GW of capacity across Europe and Russia and will be a key European player in the European power and gas sectors.

The move was announced as E.On reported impairment charges of €4.5 billion for 2014 on top of €700 million already announced in the first nine months of the year.

The charges relate largely to the firm's generating assets in Europe, which remain unprofitable because of low wholesale electricity prices and stagnant demand.

Following the split in its business, E.On will focus on expanding its renewables business into new geographies and seek growth in the wind and solar photovoltaic sectors. It will also seek strategic acquisitions in networks while investing in its existing network assets, and aim to become a leading provider of customer solutions.

E.On will employ approximately 40 000 staff after the split, and the new company around 20 000.

“We are convinced that it's necessary to respond to dramatically altered global energy markets, technical innovation, and more diverse customer expectations with a bold new beginning," said Johannes Teyssen, E.On's CEO. "E.On's existing broad business model can no longer properly address these new challenges. Therefore, we want to set up our business significantly different.

“E.On will tap the growth potential created by the transformation of the energy world. Alongside it we're going to create a solid, independent company that will safeguard security of supply for the transformation. These two missions are so fundamentally different that two separate, distinctly focused companies offer the best prospects for the future."

Teyssen added that the new company would be well positioned to meet the needs of Europe's power sector in terms of back-up generation and access to global energy markets for energy products.
Sian Crampsie



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