Our Strategy: “Empowering customers. Shaping markets.“
At the end of 2014 E.ON adopted a new strategy called “Empowering customers. Shaping markets.” It represents E.ON’s systematic response to the far-reaching changes in energy markets. By seizing the initiative, E.ON can—for the benefit of our customers, employees, business partners, shareholders, and society in general—take advantage of the significant opportunities created by the emergence of new energy worlds.
Two Energy Worlds, Each with a Variety of Opportunities
Renewables like wind and solar have achieved a cost level that is competitive relative to that of conventional generation technologies. In conjunction with batteries and other energy storage systems, renewables represent a viable alternative energy supply for more and more customers. At the same time, customers’ expectations and roles are evolving in substantial ways. Customers no longer see themselves exclusively as the recipients of power, gas, and heat service. They are taking greater interest in the source and sustainability of their energy supply. And many are already active as self-generators and energy-efficiency managers. Alongside changing customer needs, policy and regulatory decisions of recent years have also placed an increasing emphasis on renewables, distributed generation, and energy efficiency. As a result of these developments, the traditional energy value chain is fragmenting into an increasing number of discrete market segments. This creates opportunities for new specialized market entrants and makes competition even keener.
The new energy world—encompassing sustainable solutions, autonomous and proactive customers, renewables, distributed energy, energy efficiency, and local energy systems—offers considerable growth potential. It will experience more dynamic growth and will play an increasingly significant role in many countries. Nevertheless, the conventional energy world will continue to exist and to offer well-positioned companies attractive opportunities. For example, because conventional generating capacity will remain indispensible for ensuring a reliable power supply, European markets will need to establish mechanisms that provide appropriate compensation for maintaining this capacity. Companies capable of actively shaping the inevitable consolidation of Europe’s generation market will be able to strengthen their market position and gain clear competitive advantages. Globally, energy demand continues to rise, creating opportunities for energy trading and possibly fueling a recovery of wholesale energy prices. Both energy worlds offer abundant market and growth opportunities. But they differ considerably in terms of value drivers, processes, risks, capital costs, investor expectations, and success factors.
Two Specialized Companies, Each Starting from a Very Good Position
In response to a fundamentally altered market environment, we intend to divide E.ON into two distinctly focused and financially strong publicly listed companies. The future E.ON will focus on the new energy world and become an energy-solutions provider. We intend to transfer our conventional upstream and midstream businesses to a New Company, which will focus on the conventional energy world. Initially, E.ON will retain a minority stake in the New Company.
We are convinced that separating in two smaller, more dynamic companies will strengthen the competitive position of all current E.ON businesses. Both companies will be able to take a more focused approach to managing their businesses, which will pave the way to greater profitability and more dynamic growth and create attractive opportunities for employees and external stakeholders. They will be better able to differentiate their business operations according to customers, technologies, risks, and markets and to take a more focused approach to developing the necessary capabilities and processes. Each of the two companies will be able to develop a consistent corporate culture and establish a clear brand positioning. In addition, we expect that both companies will have more specific capital costs and an adequate valuation and thus improved access to capital markets.