RWE AG (RWE) said a merger of “major” European utilities is unlikely even as the region’s energy commissioner suggested Germany’s largest power and natural gas companies are too small to compete in a global market.
“I don’t think any major merger is on the cards at the moment,” Juergen Grossmann, RWE’s chief executive officer, said on the sidelines of an event in Berlin yesterday. “It is not likely this can ever happen,” he said, when asked if RWE could merge with larger German rival EON AG.
German utilities are losing earnings and cutting jobs after Chancellor Angela Merkel’s government shut down the country’s oldest reactors following the disaster at the Fukushima nuclear plant in Japan. European Union Energy Commissioner Guenther Oettinger said this month that a merger between RWE and EON could help the companies compete with the world’s largest energy suppliers.
Oettinger, in an interview with Rheinische Post, said a merger of EON and RWE would give both companies the scale to compete with Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) or Gazprom OAO. (GAZP) Grossmann cited probable antitrust concerns as standing in the way of such a combination.
Grossmann said in June that he would consider merging RWE with a competitor, should it benefit Germany’s second-largest utility. The company has considered combining with Iberdrola SA (IBE) of Spain, Sueddeutsche Zeitung reported at the time. Grossmann declined to comment on that in an interview with Sueddeutsche.
Global markets have since been rattled by Europe’s sovereign debt crisis and slower economic growth.
Germany plans to close all its reactors by 2022 after meltdowns at the Fukushima station in Japan stoked safety concerns and lost Merkel’s party votes in state elections.
RWE, based in Essen, said in November that recurrent net income, which the utility uses to calculate its dividend, fell to 1.78 billion euros ($2.25 billion) in the first nine months of 2011 from 3.18 billion euros a year earlier.
EON wants to expand into countries where growth in energy demand outstrips that in European markets. The utility, which is based in Dusseldorf, said last week that it will pay 850 million reais ($476 million) to take 10 percent of Brazilian billionaire Eike Batista’s MPX Energia SA (MPXE3) and set up a joint venture to generate 20,000 megawatts in Brazil and Chile.
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