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German energy giant RWE may follow the lead of rival Eon in splitting the upstream and supply-sides of its business in the future, but has ruled out a break up in the near term.
In an interview with Bloomberg RWE’s chief financial officer Bernhard Guenther said that the company’s reasons for not currently following suit “are all of a nature that might change over time”.
Late last year Eon said it would address the increasingly challenging market conditions in Europe by focusing on emerging energy innovations including renewables, distribution networks and customer solutions; while a new independent business, to be set up by 2016, will manage the group’s conventional power generation, energy trading an upstream activities.
RWE’s Guenther said the move “makes it easier for different shareholder groups to pick which type of risk return trade-off they want to own” but said that RWE must work to reduce its debt before thinking about how to structure itself.
He told Bloomberg that no decision is imminent, but that splitting the power generation and supply sides of the business is possible.
Utilities analysts at Citigroup and RBC Capital both agree that there is unlikely to be an Eon-style split for RWE this year.
Citi said in an investor note that it is “not convinced a spun-off GenCo would be of great attraction to RWE shareholders at a valuation that would add value to the group”.
RBC added that although it is a strong advocate of Eon’s plans, “the main focus for [RWE] remains debt reduction.”
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