E.ON Essay ⋆ Business Essay Examples ⋆ EssayEmpire

E.ON describes itself as the world’s largest investor owned power and natural gas company. E.ON is involved in every step of the power supply chain from development, through transportation, to final delivery to customers. The company describes its wide range of activities as not only allowing it to minimize risk but to also claim that its supply of both gas and power allows its customers the benefit by needing only one supplier. The antitrust offices in the European Commission have taken issue with that assertion.

In 2007 E.ON reported €67 billion in sales and €7.7 billion in profits. It employs approximately 88,000 employees. It is based in Dusseldorf, Germany, and operates throughout Europe but also has electric, gas, and renewable energy operations in North America.

E.ON came into existence in 2000 when the companies of VIAG in Germany and VEBA AG (which had existed since 1929) were merged. Since the merger E.ON has made several important acquisitions including companies in Britain, Russia (where is also has an arrangement with Gazprom), and Sweden. It has also extended its reach throughout Europe, including eastern Europe as a result of its acquisition of the natural gas provider Rurhgas in 2003.

E.ON has not been in successful in all cases where it has tried to expand. In April 2007 E.ON stopped its efforts of over a year and a half to acquire the Spanish utility company Endesa for €42.4 billion. Competing against a Spanish utility corporation and the Italian energy company Enel, which had acquired 46 percent of Endesa, E.ON dropped its bid. In return, it received a promise that it could buy part of Endesa’s assets worth approximately €10 billion.

E.ON has also drawn the attention of the European Union’s antitrust offices. In June 2008, E.ON and another energy company, GDF, were accused by the European Commission of agreeing not to sell energy to each other’s countries. E.ON has denied all accusations and has stated that it will collaborate with the European Commission to resolve the charges. Further, the company stated that it had invested several billion euros in projects to improve infrastructure that will carry gas throughout Europe. Additionally, E.ON has been under a great deal of pressure from the Commission to sell part of its infrastructure, the supply grids, to facilitate cross-border competition and in 2008 the company announced that it would sell some of its assets. Other charges against the company include accusations that it has withheld electricity in an effort to drive the price up.

The European Commission is not the only organization that has taken issue with E.ON. E.ON has been investigated by the German Government’s Cartel Office. As a result of the initial investigations, E.ON agreed that it would pay €55 million as refunds to its customers served by six of its regional companies. In addition, E.ON promised it would not initiate its planned 10 percent price increases in gas until the end of 2008. In return the Cartel Office stated that it would stop further investigations into E.ON. E.ON’s rationale was not that it had done anything wrong but that it wished to present legal proceedings that might go on for a long time and that it preferred to refund money to its customers than pay fines to the government. In November 2008 Germany’s Federal Supreme Court issued an order prohibiting E.ON from increasing the holdings it currently has in municipal services of German towns. For 10 years utility companies such as E.ON and RWE had been buying shares in these corporations in response to a loosening of regulations in 1998.

E.ON has also drawn the opposition of environmental groups. As wind farming has not been as successful in Europe as planned, E.ON has commenced the construction of coal-fired electrical generation plants, an action that has resulted in protests.

Bibliography:

Victoria Burnett, “German Suitor Makes Deal With Rivals and Ends Its Bid for Endesa, a Spanish Utility,” New York Times (April 3, 2007);
“E.ON Banned From Increasing Stakes in Municipal Services” [BGH verbietet Eon nationale Zukaufe], Europe Intelligence Wire (November 12, 2008);
ON, Corporate Responsibility Report 2007, www.eon-uk.com (cited March 2009);
ON, www.eon.com (cited March 2009);
Simon Jones, “E.ON Refunds €55m to Head Off Cartel Probe,” Utility Week (October 17, 2008);
Peter Maloney, “Foreign Firms Envision Wind Farms Dotting the U.S.,” New York Times (November 7, 2007).

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