German utility Eon expects to reduce its workforce by about 5000 people as a result of the proposed deal with RWE covering the assets of the latter's renewables company Innogy.

RWE does not expect to make any job cuts following the conclusion of the agreement. 

The deal announced yesterday would see RWE controlling the renewable generation assets of both Eon and RWE. Eon would end up with the retail and network businesses of Innogy and RWE. 

The companies expect the transaction, which is subject to regulatory approval, to close by the end of next year and, until then, Eon, RWE and Innogy will remain separate businesses and competitors.

They added that the transfer of the renewables businesses to RWE will take place “as soon as possible” after the closing of the deal.

Under the terms of the proposal, Eon would acquire RWE's entire 76.8% stake in Innogy, with RWE receiving 16.7% of Eon’s equity.

Eon chief executive Johannes Teyssen said: “This strategic exchange of businesses will create two highly focused companies that will shape a better future for Europe’s energy landscape. 

“The new Eon will be able to intensify its efforts towards climate protection, for example through the faster roll-out of charging networks for e-mobility or the advancement and extension of smart grids in Europe.”

RWE chief executive Rolf Martin Schmitz said: “Renewable and conventional energy generation are two sides of the same coin when it comes to the transformation of the energy world. 

“The expansion of CO2-free electricity generation will increasingly evolve from a regulated sector to a normal competitive market. Significant size is crucial for success in this future-orientated business.”

Eon also issued its annual results for 2017, which saw the renewables business generate more than €1.6bn in revenue last year, up 18% from the almost €1.36bn in 2016.

Offshore wind revenue grew 8% to €677m in 2017, compared with €629m the previous year, while onshore wind and solar jumped 27% to €927m from €728m in 2016.

Earnings before interest and taxes from renewables rose slightly to €454m last year, from €430m in 2016. Offshore wind EBIT remained fairly static at €337m last year compared with €338m in the previous 12 months. Onshore wind and solar EBIT was up 27% to €117m from €92m in 2016.

Onshore wind was boosted by higher production in the US as a result of new projects coming online. Offshore wind benefited from better wind conditions last year, especially in the fourth quarter, the company said.

Investments in renewables also increased last year by 14% to €1.225bn from just under €1.1bn in 2016.

Overall, the company reported EBIT of €3.074bn last year, down slightly on the €3.112bn posted in 2016.

Teyssen said: “Our earnings were at the upper end of our forecast range, and we reduced our debt significantly and more than expected and strengthened our balance sheet. This enabled us to put the burdens of the past behind us faster than anticipated.”

Image: Eon