What's going on?

On Monday, Germany’s largest utility companies, E.ON and RWE, announced a massive �60 billion deal to carve up the country�s electricity supply between them. Positively shocking!

What does this mean?

The German utilities scene has been in tatters ever since a nuclear meltdown in Japan seven years ago forced the industry to pursue a greener energy agenda. E.ON and RWE, which had historically focused heavily on conventional and nuclear energy, struggled with the new setup � and the share prices of both suffered as a result.


Now, the German giants have unveiled their plan to fight back. E.ON is buying up most of clean energy supplier Innogy, in which RWE previously had a majority share. As part of the deal, RWE will get a 17% stake in E.ON. Now here�s where it gets interesting: RWE will end up owning Innogy�s renewable energy business as well as that of E.ON. When the dust settles, E.ON will be left as primarily an energy grid company, delivering electricity to customers� homes and offices. RWE, meanwhile, will focus its efforts on becoming a renewable energy producer.

Why should I care?

For markets: Investors love this deal.

Innogy�s stock price shot up 16% on Monday. Interestingly, the share prices of E.ON and RWE also rose significantly. Investors may believe that this deal will give the two companies much-needed scale in their respective areas. Combined with a narrower focus, the reduction in direct competition should help them become more profitable.

The bigger picture: Is protectionism gaining momentum?

Protectionism has been on the global agenda for the past few weeks, most recently as the US imposed tariffs on imported aluminum and steel and Europe vowed to retaliate with tariffs on things like Harley Davidson motorcycles. Italian and French rivals were keen on striking a deal for Innogy; but an all-German deal keeps major infrastructure assets �in house�, generating profits that�ll flow through the German economy.