Interview: E.On's Johannes Teyssen on the consolidation in the energy sector

Sometimes the words not said are as interesting as those that are, and so it was with E.On chief executive Johannes Teyssen in an interview this week.

Speaking at the Financial Times Energy Transition Strategiesconference in London on Wednesday, part of FT Clean Energy Week, Teyssen discussed the wisdom of consolidation in the energy sector. However, he was coy on a reported €50bn tie-up between French giant Engie and E.On’s fierce rival RWE.

There has been talk of an alliance between Engie and RWE for a couple of months. Engie denied interest in March, but we saw the story come back to life ten days ago as Reuters reported that Engie and RWE were considering a share swap to form a Franco-German energy giant. This could also mean RWE swapping part or all of its stake in renewables subsidiary Innogy for a minority stake in Engie.

With France’s new president Emmanuel Macron keen to develop closer ties with his counterparts in Germany, there is a compelling political reason for a deal.

Teyssen would not be drawn in talking about this deal specifically, but did talk more generally about the potential for consolidation in the energy sector. He said he saw a stronger case for such huge deals in the fossil fuels sector than in renewables.

“In a conventional energy world, I see that scale and consolidation matters a lot. I am sure that we will see more consolidation on the conventional side,” he said, but added that the same logic does not hold true in renewables, where it is more important that production is closer to customers.

He said: “In the new energy world, I would argue that changes might happen but I don’t think the market is precisely driven by size and scale. These companies are driven by capability needs and customer proximity.”

Teyssen also said that consolidation had limited benefits between firms in different countries as the company still needs to adopt a tailored approach for each country.

On the topic of cross-border deals, E.On is committed to remaining in the UK after Brexit and he said he hoped the UK and European Union would find a way to keep working closely together. He added that he is concerned the discussion is too heated on boths sides.

“We just hope that the best solution can be found and both sides should not work themselves up into confrontation. I think the latest on both sides is scary. I just hope that everybody gets calmed down a bit, gets realistic, and that the UK economy is the closest possible connected to Europe. Other than that, it’s not for us to criticise.”

He was as forthright on other topics, including the UK Conservative Party’s policy to cap energy prices if it wins the election on 8 June. Teyseen called it an “amazing” policy – and not in a good way.

“The country that has built the liberalised energy world and debates for the liberalised markets is to have state intervention? Sometimes I close my eyes and hear the words and wonder whether I’m in France or in England,” he said, dismissing the idea is unnecessary because people can easily change electricity supplier.

The UK is not the only major European nation where an election is imminent. Germany is holding its federal election in September, and Teyssen expects change in the energy market after this vote as the poorest in society have been paying far more for the country’s move to clean energy sources, as a proportion of their earnings, than the richest have. He also said Germany needs more distributed generation than the current centralised system.

With elections happening in close succession in France, the UK and Germany, there will be upheaval in business and politics. Let’s hope it lets us build new alliances, not erect new barriers.

And a bit less "scary" rhetoric would do us all some good.

Sometimes the words not said are as interesting as those that are, and so it was with E.On chief executive Johannes Teyssen in an interview this week.

Speaking at the Financial Times Energy Transition Strategiesconference in London on Wednesday, part of FT Clean Energy Week, Teyssen discussed the wisdom of consolidation in the energy sector. However, he was coy on a reported €50bn tie-up between French giant Engie and E.On’s fierce rival RWE.

There has been talk of an alliance between Engie and RWE for a couple of months. Engie denied interest in March, but we saw the story come back to life ten days ago as Reuters reported that Engie and RWE were considering a share swap to form a Franco-German energy giant. This could also mean RWE swapping part or all of its stake in renewables subsidiary Innogy for a minority stake in Engie.

With France’s new president Emmanuel Macron keen to develop closer ties with his counterparts in Germany, there is a compelling political reason for a deal.

Teyssen would not be drawn in talking about this deal specifically, but did talk more generally about the potential for consolidation in the energy sector. He said he saw a stronger case for such huge deals in the fossil fuels sector than in renewables.

“In a conventional energy world, I see that scale and consolidation matters a lot. I am sure that we will see more consolidation on the conventional side,” he said, but added that the same logic does not hold true in renewables, where it is more important that production is closer to customers.

He said: “In the new energy world, I would argue that changes might happen but I don’t think the market is precisely driven by size and scale. These companies are driven by capability needs and customer proximity.”

Teyssen also said that consolidation had limited benefits between firms in different countries as the company still needs to adopt a tailored approach for each country.

On the topic of cross-border deals, E.On is committed to remaining in the UK after Brexit and he said he hoped the UK and European Union would find a way to keep working closely together. He added that he is concerned the discussion is too heated on boths sides.

“We just hope that the best solution can be found and both sides should not work themselves up into confrontation. I think the latest on both sides is scary. I just hope that everybody gets calmed down a bit, gets realistic, and that the UK economy is the closest possible connected to Europe. Other than that, it’s not for us to criticise.”

He was as forthright on other topics, including the UK Conservative Party’s policy to cap energy prices if it wins the election on 8 June. Teyseen called it an “amazing” policy – and not in a good way.

“The country that has built the liberalised energy world and debates for the liberalised markets is to have state intervention? Sometimes I close my eyes and hear the words and wonder whether I’m in France or in England,” he said, dismissing the idea is unnecessary because people can easily change electricity supplier.

The UK is not the only major European nation where an election is imminent. Germany is holding its federal election in September, and Teyssen expects change in the energy market after this vote as the poorest in society have been paying far more for the country’s move to clean energy sources, as a proportion of their earnings, than the richest have. He also said Germany needs more distributed generation than the current centralised system.

With elections happening in close succession in France, the UK and Germany, there will be upheaval in business and politics. Let’s hope it lets us build new alliances, not erect new barriers.

And a bit less "scary" rhetoric would do us all some good.

Sometimes the words not said are as interesting as those that are, and so it was with E.On chief executive Johannes Teyssen in an interview this week.

Speaking at the Financial Times Energy Transition Strategiesconference in London on Wednesday, part of FT Clean Energy Week, Teyssen discussed the wisdom of consolidation in the energy sector. However, he was coy on a reported €50bn tie-up between French giant Engie and E.On’s fierce rival RWE.

There has been talk of an alliance between Engie and RWE for a couple of months. Engie denied interest in March, but we saw the story come back to life ten days ago as Reuters reported that Engie and RWE were considering a share swap to form a Franco-German energy giant. This could also mean RWE swapping part or all of its stake in renewables subsidiary Innogy for a minority stake in Engie.

With France’s new president Emmanuel Macron keen to develop closer ties with his counterparts in Germany, there is a compelling political reason for a deal.

Teyssen would not be drawn in talking about this deal specifically, but did talk more generally about the potential for consolidation in the energy sector. He said he saw a stronger case for such huge deals in the fossil fuels sector than in renewables.

“In a conventional energy world, I see that scale and consolidation matters a lot. I am sure that we will see more consolidation on the conventional side,” he said, but added that the same logic does not hold true in renewables, where it is more important that production is closer to customers.

He said: “In the new energy world, I would argue that changes might happen but I don’t think the market is precisely driven by size and scale. These companies are driven by capability needs and customer proximity.”

Teyssen also said that consolidation had limited benefits between firms in different countries as the company still needs to adopt a tailored approach for each country.

On the topic of cross-border deals, E.On is committed to remaining in the UK after Brexit and he said he hoped the UK and European Union would find a way to keep working closely together. He added that he is concerned the discussion is too heated on boths sides.

“We just hope that the best solution can be found and both sides should not work themselves up into confrontation. I think the latest on both sides is scary. I just hope that everybody gets calmed down a bit, gets realistic, and that the UK economy is the closest possible connected to Europe. Other than that, it’s not for us to criticise.”

He was as forthright on other topics, including the UK Conservative Party’s policy to cap energy prices if it wins the election on 8 June. Teyseen called it an “amazing” policy – and not in a good way.

“The country that has built the liberalised energy world and debates for the liberalised markets is to have state intervention? Sometimes I close my eyes and hear the words and wonder whether I’m in France or in England,” he said, dismissing the idea is unnecessary because people can easily change electricity supplier.

The UK is not the only major European nation where an election is imminent. Germany is holding its federal election in September, and Teyssen expects change in the energy market after this vote as the poorest in society have been paying far more for the country’s move to clean energy sources, as a proportion of their earnings, than the richest have. He also said Germany needs more distributed generation than the current centralised system.

With elections happening in close succession in France, the UK and Germany, there will be upheaval in business and politics. Let’s hope it lets us build new alliances, not erect new barriers.

And a bit less "scary" rhetoric would do us all some good.