The proposed acquisition of Innogy by Eon is “on track” and will make the company Europe’s largest energy supplier once completed, according to a new report.
The analysis, published by S&P Global Ratings, also states the business risk profile of the combined entity will be stronger than its predecessors’ and that of its other large European peers.
According to the report, once Eon combines its network and supply activities with Innogy, the company will have a regulated asset base of about €37 billion in 2020.
This will generate 70 to 75 per cent of its earnings before interest, tax, depreciation and amortization (EBITDA) and serve about 50 million customers.
The final rating for the new entity will “depend on the deal’s completion” as well as its ultimate capital structure and financial policy, but the ratings agency “sees more upside potential than downside risk”.
“We believe the first closing date will be key for the creation of new Eon, while the second step entails less execution risk, since it comprises only pre-agreed bilateral transactions,” the report explains.
“On the first closing date – most likely in the second half of 2019 – Eon will receive RWE’s 76.8 per cent stake in Innogy in return for a 16.67 per cent stake in Eon (valued at about €3.4 billion).
“Eon will provide this stake by means of a capital increase (20 per cent capital increase and 440 million shares issued) against a contribution in kind from existing authorized capital.”
It continues: “RWE will pay Eon €1.5 billion in cash. As of the second closing date – by the end of 2020 or earlier – RWE will have received Innogy’s and Eon’s renewables activities, Innogy’s gas storage business and Innogy’s stakes in the Austrian energy supplier Kelag.”
Analyst Pierre Georges, who compiled the report, said: “With assets predominantly in European countries with relatively high ratings and generally solid regulatory frameworks, the business risk profile of the combined entity will not only be stronger than those of its predecessors, but also stronger than other large European peers.”
The report says the collapsed merger between SSE and Npower, of which Innogy is the parent company, is not anticipated to stop the Eon/Innogy deal from going ahead.
Earlier this month Eon confirmed it does not expect there to be “any material effect” on either the timing or delivery of the major asset swap between itself and RWE.
Concerns were raised about job losses after reports that Npower staff were told before Christmas that they would be working for Eon upon completion of the complex wider European asset swap deal.
However, a spokesperson for Eon told Utility Week “no decisions” have been made.