Eon, the largest German energy company, will henceforth “focus on renewables, distribution networks, and customer solutions and combine its conventional generation, global energy trading, and exploration and production businesses in a new, independent company, a majority of which will be spun off to Eon SE’s shareholders.
This new organizational setup is the logical consequence of the new strategy that the Eon’s SE Supervisory Board decided on at its meeting today” on 30 November.
Eon Supervisory Board Chairman Werner Wenning said about the decision: “I’m pleased that the Supervisory Board unanimously approved the Board of Management’s proposed new strategy, which will give our employees and our investors clear prospects in two strong companies that are viable for the future.”
“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. Eon’s existing broad business model can no longer properly address these new challenges. Therefore, we want to set up our business significantly different. Eon 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,” Eon SE CEO Johannes Teyssen said.
In 2015 Eon will take necessary preparatory steps for the New Company’s public listing. Both Eon and the New Company will be solidly financed, be positioned to secure jobs, and have prospects for creating new jobs in the future, Eon said in a press release. “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.
According to the press release, “Eon SE will focus on the new energy world and customer businesses. It will have three core businesses: renewables, distribution networks, and customer solutions. These businesses fit together and reinforce each other, creating a business portfolio with stable earnings and strong growth potential. About 40,000 employees will be assigned to the distinctly focused company, which, by concentrating on customers’ future needs, will ensure that employees have good development opportunities in a multinational energy corporation.”
In its new setup Eon will provide innovative solutions to meet the needs of its roughly 33 million customers. It will take new approaches to further developing each of its three core businesses. For this purpose Eon will increase its investments already for the next year by about €0.5 billion compared to the previously planned 2015 capex of €4.3 billion. Eon will place a particular emphasis on expanding its wind business in Europe and in other selected target markets. It will also strengthen its solar business. It will upgrade its energy distribution networks in its European markets and also in Turkey and make them smarter so that customers can take advantage of new products and services in areas like energy efficiency and distributed generation.”
“Thanks to numerous initiatives and competitive products and services, Eon has substantially enhanced customer satisfaction in its core markets. The current year is the first in some time in which Eon has enlarged its customer base in Germany. Through co-investments, Eon already partners with European and American start-ups that are developing promising energy solutions that incorporate technologies of the future. In addition, the company’s ‘agile’ program supports innovative business ideas developed by employees and others and helps the entrepreneurs realize their vision. Eon will position itself as a pioneer in innovative, customer-oriented solutions. It will identify trends and technical advances early and draw on them to develop solutions for customers. “These efforts will be guided by one objective: we want to be best in class in customer satisfaction in all our target markets,” Teyssen said.
“The transformation of the energy system will continue to require reliable backup capacity well into the future as well as access to global markets for energy products. With a portfolio consisting of conventional power generation, global energy trading, and exploration and production, the New Company will focus precisely on meeting these needs,” Teyssen said. He added that the New Company’s clear focus will put it in an excellent position to lead the necessary consolidation of power generation in Europe and to offer attractive services for the system needs of the future.
“Over the past decade Eon has established leading positions in conventional power generation in Europe and Russia. In recent years Eon has systematically optimized its generation fleet and production costs, laying the foundation for sustainable profitability. A strong natural gas portfolio—which encompasses exploration and production, gas transport pipelines to Europe, long-term gas procurement contracts, and substantial storage capacity in Germany—makes Eon one of the leading players in the natural gas business of the future. These power and gas activities will continue to have Eon’s well-established trading unit as their interface with global commodity markets and European trading platforms. The New Company, which will have its headquarters in Germany’s Rhine-Ruhr region and offer good prospects to about 20,000 employees, will create a better platform for securing jobs in an altered market environment.”
Eon’s strategic transformation represents an important and attractive opportunity for regulators and policymakers as well, said the company. “Eon is clearly separating power and gas production and trading from its end-customer businesses, thereby making both even more transparent for regulators. The new setup will enable Eon to accelerate the deployment of new technologies and at the same time make a significant contribution to supply security. Both parts of today’s Eon will be developed in ways that ensure their future viability.”
(Source: Eon. The full press release can be found here. Note that Eon’s main competitor, RWE, has already announced a similar change in strategy, without however, going as far as divesting its conventional power generation business. A spokeswoman for RWE said to news agency Bloomberg that the company has no plans to follow Eon’s example.)