RWE and E.On agree on sale of Innogy stake

RWE solar farm in Hungary. Image RWE

RWE solar farm in Hungary. Image RWE

The in-principle agreement involving asset swaps is part of a major restructuring of Germany's energy market as Europe's top economy switches from conventional to renewable power.

The logo of German energy company Innogy at its headquarters in Essen.

Boards of both companies still need to approve the transaction. In particular, antitrust and regulatory approvals would be necessary, the companies said.

And the deal could see the creation of a new European renewables giant.

"Through the renewable pipeline, RWE, too, should be able to offset its dwindling nuclear and lignite business as well as attract partners for the expansion of its wind business".

Shares in Innogy were indicated to open 16 percent higher in pre-market trade.

In addition, RWE will - after E.ON has gained control over innogy - get substantially all of E.ONs renewables business including the economic benefits as of January 1, 2018. "We will comment on the latest announcements by RWE AG and E.ON SE in due course", Innogy CEO Uwe Tigges said.

"A win-win?" Morgan Stanley suggested in a note, reiterating its "in-line" view of the industry.

The deal, if approved, would spell the end for Innogy as a standalone company. It has been in turmoil since former Chief Executive Peter Terium resigned in December and on Monday said it would cut 400 million euros in costs through the end of 2020.

The all-German transaction comes less than two years after E.ON and RWE both split up their businesses to separate legacy fossil fuel power plants from more promising networks and renewable assets.

Innogy reported a 3 percent rise in 2017 adjusted operating profit and said it would propose a dividend of 1.60 euros per share for 2017, unchanged from a year earlier.

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