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    Giant German Utility Splits into Two

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Summary

Germany’s largest utility E.ON broke into two companies as planned on January 1st, retaining under its own name the renewables, energy networks and customer solutions

by: William Powell

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Natural Gas & LNG News, News By Country, Germany, Gas to Power

Giant German Utility Splits into Two

Germany’s largest utility E.ON broke into two companies as planned on January 1st, retaining under its own name the renewables, energy networks and customer solutions businesses. It has demerged all its fossil fuel and hydro plant and global energy trading businesses – with the attendant long-term contracts, gas production and other elements essential to energy security – into Uniper.

The old utility model -- where regional monopolies bought and sold gas on oil-indexed price terms and shipped it through their own networks -- has failed to survive the modern era. Competition in gas and power supply and trading, regulatory scrutiny and the enforced separation of supply from transport exposed companies like E.ON to forces beyond their control.

“This liberates us from continually having to make compromises. Our ambition is for both companies, which soon will be legally independent of one another, to become leading players in their respective energy worlds,” E.ON CEO Johannes Teyssen said January 4th. “Separating these businesses, which were formerly managed together, will make both companies more agile and sharpen their profile for customers and investors,” he said.

E.ON will be based in Essen and Uniper in Dusseldorf. The spinoff of Uniper and its 40 gigawatts of capacity is expected to take place later in June 2016 following the approval of E.ON shareholders, E.ON said. It will sell the rest of its stake in the medium term.

E.ON announced just over a year ago that it would respond to the distinctly different challenges of the new and conventional energy worlds by dividing its businesses into two companies.

Uniper CEO Klaus Schäfer – a former head of E.ON Ruhrgas -- said: “Economic prosperity is and will continue to be fuelled by energy. The global population is growing and so is its consumption of energy, which people take for granted. Ensuring that people have a secure and cost-effective supply of power and gas will remain a crucial task. That’s what Uniper is all about.”

Uniper also has a position in global energy trading, including liquefied natural gas purchase contracts.