Due to sagging profits and changing market conditions the two biggest energy companies of Germany, RWE and Eon both decided to split their companies into a “conventional” and a “new” branch. The same pattern can be recognized in both cases.
On 1st of April 2016 the separation of the energy company RWE has been decided. From 1st of September 2016 onwards the new corporation RWE International SE will be operate under the name of “Innogy” and will be responsible for the business sectors renewable energies, grid operation and retailing. About 40000 of RWE’s total 60000 employees will work for the new company. By separating the main corporation, RWE aims to react to a highly dynamic energy market and new competitors, such as Tesla, Google and Apple. The increase in electricity prices from 21 EUR/MWh in February to the current level of about 27 EUR/MWh is not sufficient to run power plants economically, Matthias Hartung, CEO of RWE Power explains. Because of the strong downward pressure on prices roughly 2300 full-time jobs will disappear. In addition the open-cast lignite mining site Garzweiler 2 has been downsized by planning authority of North-Rhine Westphalia, which implies the loss of several hundreds of million tons of lignite for RWE power. According to Hartung, this will result in the reduction of lignite production by RWE of 15 percent until 2020.
At Eon, Germany’s second large energy utility, a similar path has been deemed reasonable and a new corporation called “Uniper” has been founded. Uniper pools conventional energy generation, global energy trading and investment in gas fields. As of now, 14000 people work at Uniper, while the mother company employs 40000. The separation of the Eon into two corporations has been confirmed at the annual general meeting of the energy company in the beginning of June 2016. The remaining “new” Eon will be responsible for the business areas of hydropower, wind and solar energy, grid operations and modern energy services.
The separation of RWE as well as of Eon was a reaction on declining margins in the energy sector. If this conversion from Saul to Paul with the new foci on renewable energies and modern energy sales, will take place without major difficulties is far from being certain. One thing that is certain, however, is the fact that the big energy companies underestimated the expansion of renewable energies and overestimated the development of power prices. The radical measures undertaken clearly demonstrate that both companies have to develop a new self-conception in order to be successful in an energy market that is increasingly dominated by decentralized and renewable power generation.
