German utility E.ON announced plans to divide in two and grow through its power generation and energy transaction, with more focus on renewable activities.
E.ON will hold a news conference about its plans, which will include investing more in wind and solar power.
The main reason behind the split is considered to be a crisis that has crippled the European energy sector.
With this decision, E.ON is avoiding a sector has been hard hit by Germany’s decision to boost renewables at the expense of gas, coal and nuclear power plants.
E.ON will focus on regulated distribution networks and tailor-made energy efficiency services, citing dramatically altered global energy markets, technical innovation, and more diverse customer expectations.
The utility’s existing broad business model can no longer properly address these new challenges, stated, Johannes Teyssen, chief executive, E.ON, Germany.
Hit by a weak energy demand, low wholesale power prices and a surge in renewable energy sources that replace gas-fired and coal-fired power plants, German power sector is going through a crisis.
However, about 40,000 of its employees would remain with the parent group, while the remaining 20,000 would join the new company, even after the spin-off.
E.ON’s generation, upstream and global commodities units, the latter of which includes trading, accounted for about 35 percent of its $11.60 billion in earnings before interest, tax, depreciation and amortization (EBITDA) in 2013.
Renewables and regulated businesses alone accounted for 54 percent.
E.ON has seen its market value drop to about 29 billion euros, down from 100 billion euros in 2008, over the past six years.
The existing provisions for the disposal of nuclear and conventional assets would be fully covered in the new company’s balance sheet.
The businesses in Spain and Portugal will be sold to Australian energy firm Macquar for 2.5 billion euros.
The group has plans to conduct a strategic review of exploration and production business in the North Sea.
Sabeena Wahid
editor@greentechlead.com