The Bundeskartellamt has no objections to the acquisition of a stake in E.ON by RWE

The Bundeskartellamt today cleared the planned acquisition of a minority stake of 16.67% in E.ON SE by RWE. The planned acquisition is part of an extensive exchange of business activities between the two undertakings. The Bundeskartellamt’s decision comes at the same time as the clearance by the European Commission of the planned acquisition of E.ON assets by RWE. The European Commission’s examination of the acquisition of a majority stake in and control over Innogy by E.ON is still ongoing.

The part of the overall transaction to be examined by the Bundeskartellamt mainly concerns the market for the generation and first time sale of electricity, e.g. to wholesalers, distributors and large industrial customers, but not the sale of electricity to final consumers.

Andreas Mundt, President of the Bundeskartellamt: “We have thoroughly examined the effects of the planned shareholding of RWE in E.ON of 16.67% in cooperation with the European Commission. No competition concerns arise as regards the generation and the first time sale of electricity. RWE is by far the leading supplier in the conventional power generation sector in Germany. This part of the transaction, however, only has a minimal effect on RWE’s market position.”

Electricity generation that is not subsidised under the Renewable Energy Sources Act (EEG), in particular from nuclear, coal and gas-fired power plants, is considered conventional. When assessing the impact of the acquisition, it first had to be taken into account that RWE was acquiring conventional generation capacity from E.ON as part of the overall transaction, as well as generation capacity subsidised under the EEG. However, the aforementioned conventional generation capacity acquired by RWE consists of shares in and the corresponding rights to draw power from nuclear power plants that will be decommissioned by the end of 2022. Secondly, it had to be considered that RWE intends to sell conventional generation capacities to E.ON, as well as generation capacities subsidised under the EEG. This is part of the sale of the majority stake in or control over Innogy to E.ON, which is currently being reviewed by the European Commission. RWE's acquisition of the minority stake in E.ON, which is the only consideration here, would only lead to a marginal nominal increase of RWE’s capacities, even if all of E.ON’s capacities were to be attributed to RWE. Following the completion of the nuclear phase out by the end of 2022 and therefore within the projection period for assessing the impact of the transaction, only a minimal permanent increase of less than one percentage point of the conventional generation capacity in Germany would remain.

Moreover, due to the limited storage capacity of electricity, a market share analysis does not fully reflect potential sources of market power in the generation and the first time sale of electricity. In the course of its investigations, the Bundeskartellamt therefore collected extensive data on the actual deployment of all power plants in Germany. On this basis, it was analysed to what extent RWE's generation capacities are actually indispensable to meet the demand for electricity in Germany (RSI analysis). The results of the analysis showed that RWE’s power plants are currently already indispensable to meet the demand for electricity for a significant number of hours in the year. The nuclear phase out, which is due to be completed by the end of 2022, is likely to lead to a significant increase in the degree of indispensability of RWE’s remaining power plant fleet.

Andreas Mundt: “In the near future, RWE’s power plant fleet will become significantly more important for the security of supply in meeting the demand for electricity in Germany. The reasons for this are the imminent decommissioning of the last nuclear power plants as well as the planned coal and lignite phase out. However, this development, which we will be monitoring very carefully, will not be further affected by the current investment in E.ON.”

Even though RWE as the largest generator is acquiring a stake in what is to become Germany’s leading electricity retailer, the minority shareholding will not lead to significant anticompetitive incentives to foreclose markets. In the gas sector, no negative competitive effects were to be expected due to either the lack of overlaps in the respective fields of activity or due to modest market shares.

Background: In contrast to the other parts of the overall transaction, the acquisition of the minority stake by RWE does not constitute a merger ("acquisition of control") under European law. However, it does constitute the acquisition of a significant competitive influence under German law and was therefore subject to notification in Germany.

Further information on the proceeding can be found in a backround paper (in German).