collateral damage

Clean Energy May Clean Companies Out

energy transititon_rwe_eon_dpa
Germany's energy transition challenges the very existence of the two largest power companies E.ON and RWE.
  • Why it matters

    Why it matters

    Faced with the energy transition, executives at Germany’s two major power companies, E.ON and RWE, took the wrong strategy but their difficulties are also partly due to the government’s interference in energy markets.

  • Facts


    • Large-scale efforts by government officials to push the nation toward wind and solar power have heavily damaged the two energy giants, which have recorded unprecedented losses and seen their combined market value  shrivel by €37 billion since 2011 as share prices have plummeted.
    • Executives at the power companies virtually ignored the shift to renewable energy, investing heavily in nuclear and coal-fired plants through much of the 2000s.
    • Government intrusions into the market including grants to renewable energy companies and priority on energy grids have further damaged Eon and RWE, which have shed thousands of workers in efforts to restructure and cut costs.
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Now, it’s RWE’s turn. After E.ON, Germany’s second largest electric utilities company and market leader announced plans for a radical restructuring, its rival RWE will also completely reposition itself to avoid going under as Germany’s energy transition moves forward. RWE will merge or liquidate its subsidiaries on a grand scale.

If you want to see how much the transition to renewable energy in Germany has roiled the domestic market, just look at how the two heavyweights are reacting.

Without question, company executives at both firms — past and present — contributed greatly to the crisis now threatening their very existence.

They reacted much too slowly to the new world of energy and they held on to their nuclear, coal and gas power plants for far too long.

Now, E.ON CEO Johannes Teyssen and RWE CEO Peter Terium are being forced to take drastic measures since the government’s large-scale intervention in the energy market inevitably meant their companies would suffer collateral damage.

The fall of E.ON and RWE is unprecedented. E.ON had record losses this year of €3 billion ($3.3 billion) while RWE skidded into the red on a similar scale last year for the first time since the end of the Second World War.

Since 2010 — the year before the Fukushima reactor catastrophe upended the energy world — E.ON’s operating earnings have shrunk by 50 percent to €4.7 billion while at RWE’s have fallen by almost half to €4 billion.

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