European Consolidation Board for Foreign Industry (ECBFI)


European Consolidation of Renewables (EON & Fortum)

Posted on July 12, 2017 at 8:20 AM

ECBFI: A year after the break-up of Eon and RWE in a sweeping restructuring of Germany’s power industry, investors are bracing for the next wave of upheaval in European utilities.

Bankers and industry executives say further deals look certain as electricity companies scramble to adapt to the accelerating shift towards renewable energy. The £318m sale last month of two UK gas-fired power stations by Centrica to EPH of the Czech Republic was the latest example of a utility reshaping its portfolio. Now, expectations are growing of bigger transactions to come.

Much of the anticipation is focused on the new companies created by the separation of Eon and RWE. Both German utilities split themselves in two, with one unit focused on traditional thermal generating businesses — dominated by coal and gas-fired power — and the other comprising “cleaner” businesses, such as renewables, electricity distribution and consumer services.

Uniper, the conventional power business spun out of Eon, has been touted by analysts and bankers as a potential target for Fortum, the Finnish utility. Meanwhile, Innogy, the clean energy business split from RWE, has been linked with Engie of France. Johannes Teyssen, chief executive of Eon, says the case for consolidation across Europe iis most obvious among traditional thermal generators as they seek strength through scale in the face of rising competition from wind and solar.

“In the conventional energy world, scale matters a lot so I’m sure that we will see more consolidation steps,” he told a recent European Consolidation Board energy conference. “As more and more fossil fuel assets are retired, the smaller players will become smaller and less competitive and less able to deliver value.”

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