E.ON—a major investor-owned energy supplier that manages facilities across Europe, Russia, North America, Brazil, and Turkey—announced this week that it will embark on a new corporate strategy focused on renewables, distribution networks, and customer solutions, while combining its power generation, global energy trading, and exploration and production businesses into a new, independent company.
“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. 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,” E.ON CEO Johannes Teyssen said in a press release.
In a separate announcement, the company said that it has agreed to sell all of its Spanish and Portuguese businesses to Macquarie European Infrastructure Fund IV—an Australian investment firm—for €2.5 billion. It’s not the first time the two have done business. Macquarie also acquired E.ON’s German gas distribution business back in May 2012. The latest deal will include about 4 GW of coal, gas, and renewable capacity in Spain and Portugal. Teyssen said that the assets were high performing, but that the proceeds would increase E.ON’s financial flexibility and strengthen its balance sheet.
Late last week, E.ON announced that it would sell an 80% interest in two U.S. wind farms that it owns. In that transaction, Enbridge Inc.—a Canadian company—will purchase stakes in the 203-MW Magic Valley 1 wind farm located near Harlingen, Texas, and the 202-MW Wildcat 1 wind farm near Elwood, Ind., for $650 million.
E.ON also says it is exploring options for disposing of its Italian operations and will conduct a strategic review of its exploration and production business in the North Sea.
Prior to all of the changes, the company—headquartered in Dusseldorf, Germany—was said to have more than 62,000 employees. The changes are sure to have workers on edge, but E.ON says it won’t be cutting jobs as a result of the spinoff. The company notes that management will work closely with employee representatives to work out the details of the new setup and to implement it, thereby improving the conditions for securing jobs.
“We firmly believe that creating two independent companies, each with a distinct profile and mission, is the best way to secure our employees’ jobs. Our new strategy therefore isn’t a job-cutting program,” Teyssen said.
E.ON expects to carry out the spinoff after approval by shareholders at their meeting in late April or early May 2016.
—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)