Powering Success: Germany’s Largest Energy Transaction
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October 25, 2023
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FTI Consulting subsidiary Compass Lexecon assisted German electric utility company E.ON to obtain conditional clearance for its acquisition of certain assets of utility company Innogy.
Our Impact
The team’s analyses removed several of the competition concerns that the European Commission (“EC”) had put forward when opening a Phase II investigation of the transaction.
- In September 2019, the EC approved the transaction on the condition that E.ON sold certain electricity and gas retail businesses in Germany, the Czech Republic and Hungary, and the acquisition was completed in 2020.
- Following the acquisition, E.ON became one of Europe’s largest operators of energy networks and energy-related infrastructure, with more than 50 million customers in 15 countries.
- RWE and E.ON completed their asset swap. E.ON’s wind, solar and hydropower businesses, as well as biomass, biogas and gas storage activities, were transferred to RWE.
Situation
In March 2018, German energy company E.ON, one of the world’s largest electric utility providers, announced that it would acquire the distribution and consumer solutions business as well as some electricity generation assets of Innogy from its controlling shareholder, RWE, Germany’s second-largest utilities company. The EUR43 billion acquisition was part of an extensive asset swap transaction between E.ON and RWE. The European Commission, which oversees market competition in the European Union, announced an in-depth merger investigation into the transaction in March 2019, citing concerns that the combined entity would lessen competition in retail markets for electricity and gas in some member states. Compass Lexecon, a subsidiary of FTI Consulting, was engaged by E.ON from the outset to advise the company throughout the merger control proceedings and provide economic analyses of the impact of the acquisition on energy markets in Germany, the UK, the Czech Republic, Hungary and Slovakia, where the companies’ activities mostly overlap.
Our Role
- Compass Lexecon developed and presented to the EC several economic analyses to assess the likelihood of unilateral effects in the energy market in Germany, the UK and three Central and Eastern European countries (Czech Republic, Hungary and Slovakia).
- Compass Lexecon prepared a margin-concentration analysis of the German retail market, an analysis of tender data for electricity and gas distribution networks in Germany and other economic analyses, demonstrating that the two companies focused on different geographic areas, were rarely rivals in the supply of regular electricity and gas and would continue to face competition from other suppliers.
- Based on an analysis of multiple data points (e.g., switching data, tariffs, margins and tender data), the team assessed market definition and closeness of competition for the UK and Central and Eastern European markets.
- Compass Lexecon also provided support in the assessment of remedies.
Key Contacts