The agreement is considered a major restructuring of Germany's energy market and comes in the wake of Chancellor Angela Merkel's 2011 decision to abandon nuclear power and focus on renewable energy sources.
Peter Altmaier, the next economy minister and a close ally of Merkel, said the deal was a outcome of that shift, known as the "Energiewende" in German.
German utility company E.ON is now in control of the renewable energy segment created by its rival, RWE, in a landmark, multi-billion dollar deal, they said. Uwe Tigges, chief executive officer at innogy, said it would be commenting on announcements from RWE and E.On "in due course".
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A source involved in the deal said it would be slightly more beneficial to E.ON, which would become a bigger regulated business by adding more networks, while RWE would end up owning interests in the riskier and more competitive renewables sector. In addition, RWE would get the minority stakes held at present by E.on subsidiary PreussenElektra in the RWE-operated nuclear power plants Gundremmingen and Emsland.
Furthermore, E.ON would transfer to RWE most of E.ON's renewables business and also the minority interests now held by E.ON's subsidiary PreussenElektra in the RWE-operated nuclear power plants Emsland and Gundremmingen. Under the agreement in principle, E.ON would receive RWE's 76.8% stake in innogy in return for granting RWE an effective participation of 16.67% in E.ON SE. RWE will pay another 1.5 billion euros to E.ON to close a valuation gap that results from the complex structure of the asset swaps.
For the transaction to complete, additional conditions are to be met by the companies, including approvals from antitrust and regulatory authorities.