Taking a global lead

E.ON was formed in June 2000 by the merger of VEBA and VIAG. Both of these companies were founded in the 1920s as holding companies for state-owned industrial enterprises. To date, the company is a major instrument in obtaining strategic influence with regards to the European energy supply. In this way, the German Government was able to takeover the large gas provider Ruhrgas in 2002 with ministerial approval. As a consequence, E.ON AG turned into the largest private energy service provider in the world. Berlin states that the reason for the extraordinary state encroachment is that Germany wants to be a "national champion" in the international energy market in the future.[1]

The vision

For the time being, German companies control a large proportion of the European energy supply. Especially with regards to the evermore important supply of natural gas, several nation states have become largely dependant on Germany.[2] E.ON and the second biggest energy group RWE are striving for a dominant position in this sector. The energy company E.ON, has announced further detailed goals and wants to become "the leading electricity and gas company in the world."[3] The company is pursuing the propagated target planning known as "the vision" which involves several acquisitions; currently with a total of around 70,000 employees, it has a turnover of about 49 billion euros. Further take-overs have been announced: with profits of 7,3 billion euros, as well as liquid funds amounting to twelve billion euros. In German financial circles, rumour has it that E.ON is bristling with financial strength and could afford any company currently on offer on the market.[4]

Dependent on E.ON

In Great Britain, E.ON is set for a new expansion jump and is getting ready for the takeover of the energy company Scottish Power - with a buying price of up to 20 billing euros, it is most probably the largest acquisition in the history of the company.[5] E.ON already controls 11 percent of the British electricity generation and 18 percent of the trade in electricity and gas. On the strategic agenda of the German company, expansion of Great Britain"s gas supply infrastructure is being planned. The import demand of the country is increasing, as the production of gas in the off-shore stocks is gravely decreasing. To counterbalance the imminent shortages, E.ON Ruhrgas is involved in the essential feeding into the continent, with the construction of a new pipeline between the Netherlands Galzand and the Bacton in Britain - gas supplies to Britain will produce German shortages in the future.

E.ON UK

Even in the area of non fossil fuel sources of energy, E.ON is advancing in Great Britain. As a result of EU initiatives which accommodate industrial interests in Berlin, many electricity providers are increasingly obliged to sell an increased amount of renewable energy from the "island". Relevant technologies keep E.ON ahead and enable its British subsidiary (E.ON UK) to invest heavily in wind parks on the shoreline.[6]

Perspectives

A further market which E.ON has in view for the future is Italy, whose importance as a transit country for northern African energy sources will increase - this is proven by EU strategy papers.[7] In fact, the German company is involved with several northern Italian gas suppliers, but has only attained a market share of 5 percent. This margin should shortly be doubled and E.ON also sees positive growth perspectives in the generation of electricity and sales, due to the fact that Italy is strongly reliant on imports. When deliveries from Switzerland were disrupted last year, the entire Italian electricity network broke down for several hours. There are already reports about a possible takeover of the second largest Italian electricity society Edison (turnover of 5.6 billion euros with a share of the Italian electricity market of 17 percent).[8] By buying more, E.ON could compete against the Italian market leader, which was previously the state owned company ENEL to group together the determining Roman and Milan powers of the business elites. There is resistance to this seizure in the non-party agreement of Italian policies.

The model

E.ON underwent extensive acquisition of additional companies in the last few years in the eastern and south eastern European countries. The strategic energy plans of the EU quantify an important bridge function in the direction of the Caucasus Mountains, for example central Asia.[9] Through targeted acquisitions, the German company has been able to increase its market share by around 30 percent. Step for step, minority shareholdings acquired in former years in Czech Republic, Slovakia and Hungary were expanded to a majority. The same is expected in the EU acceding countries Romania and Bulgaria, where E.ON already has a stake in the local electricity and gas supply.[10] In the future, the German company wants to close existing competition advantages of other suppliers in the electricity sector. To date, E.ON is only represented in local sales in this area, but is currently considering in also getting involved in the production side. Against the background of the German-Russian energy alliance, E.ON has an unattainable competitive advantage that closes off the eastern European market against western interests [11]; it also causes concerns of Germany having complete monopoly of the gas line [12].

Contradictions

A major point of conflict is E.ON's endeavour to be the first German energy service provider in the gas business with Iran.[13] Corresponding negotiations with Tehran have already taken place and are targeting the second biggest reservoir in the world.[14] E.ON is negotiating with the Austrian oil and gas group OMV with regards to importing Iranian resources by land. The group wants to build a pipeline from the Iranian border to western Europe via Turkey. The Iranian activities clash with the intentions of E.ON to also expand in the USA on the long term. So far the German group is only present in the mid west, predominantly in the state of Kentucky that should be the base to start from for further expansion in the USA to become the biggest electricity and gas market in the world.[15] Companies dealing in the USA are threatened with severe punishments if they become active in Iran.

[1] see also Deutscher "global player" soll strategischen Einfluss auf Energiequellen sichern and Eon: Europas größter privater Energiekonzern
[2] see also Background Report: German "Geopolitics"and the Struggle for Energy Sources, Deutsche Ruhrgas AG: Übernahme der "Hauptschlagader" der westeuropäischen Gasversorgung and Europäische Energieversorgung unter deutscher Kontrolle?
[3] Unsere Strategie: Profitabel wachsen und Markpositionen ausbauen, www.eon.com
[4] see also Zuviel Geld
[5] see also Kernmarkt
[6] see also "Windkraft-Weltmeister" sucht Exportmärkte
[7] see also Area of Natural Gas
[8] see also Eon vor Expansion in Italien
[9] see also Kriegsrendite
[10] see also Brückenkopf
[11] see also Area of Natural Gas
[12] see also De facto Axis and Östliche Achse
[13] see also Eingliederung and False Promises
[14] see also Attraktiv
[15] see also "Die Welt ist gerade genug"- Deutscher E.ON-Konzern will US-Energiemarkt erobern