Some of Germany's largest municipal energy suppliers have urged the European Commission to block utility E.ON SE from taking over rival innogy SE, arguing that the megamerger should only proceed with additional divestments to dispel concerns over the two companies' combined market power.
In an open letter published Aug. 26, 10 municipal utilities called on the antitrust regulator to stop the transaction, part of a €40 billion asset swap with Innogy parent RWE AG, unless the companies are forced to sell off parts of their retail businesses and stakes in other suppliers.
RWE received approval for its part of the deal, which centers on the acquisition of E.ON and Innogy's renewables assets, in February. But the European Commission, worried about dwindling competition, launched a deeper probe of E.ON's side of the transaction, prompting the utility to offer a series of asset disposals in Germany, Hungary and the Czech Republic.
But the municipal suppliers said those concessions don't go far enough. They allege the takeover, if approved as currently proposed, would effectively reverse the liberalization of Germany's energy markets, allowing E.ON to control not only a large part of the distribution network and power and gas retail, but also corner the market for solutions like smart metering and electric vehicle charging.
"Free and fair competition would be just as limited as freedom of choice and consumer protection," they said in the letter. "The market would become significantly more in-transparent again."
The utilities opposing the transaction include Mainova AG, which supplies around 1 million customers around Frankfurt and reported just over €2 billion in revenues last year, as well as municipal utilities in the cities of Leipzig, Aachen, Darmstadt and Schwerin.
Other energy companies, most notably LichtBlick SE, a renewable power supplier owned by Dutch Eneco Groep NV, have previously criticized the deal.
The municipal suppliers now demand that E.ON be forced to sell off its two discount retailers, E wie einfach and Eprimo, and that Innogy also sell its stakes in municipal utilities and independent suppliers before the merger is approved. With proceeds from its regulated network business and basic supply, E.ON could "offer competitive prices, squeeze out smaller competitors and close off the market," they wrote.
The signatories calculate that E.ON's customers in Europe will jump from 31 million to 50 million and that the utility will operate half of all electricity networks and a fifth of gas pipelines in Germany, gaining the upper hand when it comes to tenders for additional capacities.
Utilities opposed to the deal could take their case to court if the commission does not address their concerns, Ines Zenke, a partner at law firm
But E.ON CEO Johannes Teyssen has dismissed the companies' concerns and, on a recent earnings call, signaled optimism that the deal would be approved. The European Commission's decision on the case is expected by Sept. 20.
