From diversified Group to leading partner for energy and energy-related services in Europe
The diversity of the activities of RWE and its subsidiaries necessitates that the Group structure be adapted and reorganized. Its traditional core business, electricity production and distribution, is contributed to newly-founded ‘RWE Energie AG’, Essen. The ‘Rheinisch-Westfälisches Elektrizitätswerk AG’ is renamed ‘RWE AG’; as the management holding company, it is responsible for shaping the destiny of the Group.
Within the five Group divisions - Energy, Mining and Raw Materials, Petroleum and Chemicals, Waste Management, and Mechanical and Plant Engineering - operations are managed by RWE Energie, Rheinbraun, RWE-DEA, RWE Entsorgung, Rheinelektra and Lahmeyer. The new position of Chief Executive is assumed by Friedhelm Gieske.
After RWE increases its holdings in HOCHTIEF to a majority interest, a sixth Group division is added with HOCHTIEF at its head.
After the fall of the Berlin Wall and the reunification of East and West Germany and the reunification that follows, the companies in the RWE Group and VEW commit themselves to rebuilding the economy of Germany's five new federal states. RWE Energie and VEW get involved in VEAG, ‘Vereinigte Energiewerke AG’ operations, the electricity utility (generation and transmission) which succeeds the former state-run energy combine, and in several regional utilities which take up the challenge of modernising electricity generation in East Germany by introducing big investment programmes. In addition, VEW has an interest in three regional gas utilities.
RWE-DEA leads a syndicate of European petroleum groups which acquires former ‘Petrochemische Kombinat Schwedt’ in 1991 and develops it into an economically viable chemicals operation under the name of ‘Petrochemie und Kraftstoffe AG Schwedt’ (PCK), Schwedt/Oder (later PCK Raffinerie GmbH).
In addition, greenfield plants are built: For example in 1993 by Heidelberger Druckmaschinen AG in Brandenberg and by SAG in Neumarkt (Saxony). HOCHTIEF builds up an extensive network of subsidiaries in the new states by acquiring former state-owned companies.
RWE-DEA begins to expand its activities in chemicals, which had previously been concentrated in two plants in Germany, through the acquisition of the U.S.-based Vista Chemical Corp., Houston (later CONDEA Vista Company). Subsequent additions include ‘D.A.C. Chimiche S.p.A.’, Milan (1992), and ‘EniChem Augusta S.p.A.’, Palermo (1994, later CONDEA Augusta S.p.A.). This makes RWE-DEA's chemicals division, which had been doing business under the name CONDEA since 1996, one of the world's leading suppliers of alumina and raw materials for detergents.
Rheinbraun also increases its activities in North America. In return for contributing its hard coal interests, it acquires a 50 per cent stake in Consol Energy Inc., Wilmington, Delaware. Following acquisition of further mines, this joint venture with American chemicals group DuPont is the USA’s third largest producer of hard coal. In 1998, Rheinbraun becomes the majority shareholder of Consol as DuPont withdraws almost completely.
Diversification is not only RWE’s goal but is pursued by VEW too. It acquires the majority interest in the Harpener AG, Dortmund, which is in economic difficulties. Harpen is mainly active in the fields of energy, real-estate and logistics. VEW also acquires an initial interest in Edelhoff, a waste management company based in Iserlohn - a full takeover follows in 1994.
After long and controversial discussions, privatization of the East German energy sector can be concluded. As an interconnected utility, ‘VEAG Vereinigte Energiewerke AG’, Berlin, manages a large part of the power generation and high-tension transmission operations. Its main customers are twelve newly-established regional utilities. Together with the other West German interconnected utilities, RWE Energie and VEW have a share in VEAG and acquire the majority in three, or rather one, East German regional utility.
At the same time, Rheinbraun and RWE Energie form a consortium to purchase a majority shareholding in lignite producer LAUBAG, ‘Lausitzer Braunkohle AG', Senftenberg. On the basis of the fixed terms of supply to VEAG, which uses only lignite for electricity production, LAUBAG is now able to implement a forward-looking coalfield development plan.
Having already been operating in the telecommunications market for five years (including participation in invitations to tender on private-sector mobile phone licenses, acquisition of service providers, strategic alliances), RWE's telecommunications activities, which until now had been spread out over several of the Group's divisions, are now consolidated within RWE Telliance AG.
The increasing privatisation and deregulation of the European electricity industry provides opportunity to further internationalise the RWE group. Aside from operations in the Czech Republic, Portugal and Croatia, RWE Energie also participates in, for example, Hungarian utility companies and the Swiss Motor Columbus AG, Olten (1997). VEW starts to internationalise its operations too. VEW Energie acquires initial interests in two regional gas utilities in Hungary.
Five years after RWE, VEW also restructures corporate organization following diversification. The former ‘Vereinigte Elektrizitätswerk Westfalen AG’ is now VEW AG, which manages the group as the holding company. Gas and electricity business previously operated by ‘Vereinigte Elektrizitätswerk Westfalen’ is now transferred to the new ‘VEW Energie’, Dortmund. Further such management companies include ‘MEAG Mitteldeutsche Energie AG’, Halle/Saale (regional utility), ‘Harpen’ (services) and ‘Edelhoff’ (waste management).
Long-term research efforts begin to pay dividends at RWE Energie: The company decides to use its Niederaußem site in the Rhenish lignite district to build its first 1,000 megawatt lignite fired power plan unit with optimized plant technology. By improving all areas, it is able to achieve a net efficiency of over 43 per cent (compared to 35.5 per cent for a 600 megawatt unit in the mid-70's). Aside from more cost-effective operation, this means improved utilization of lignite and therefore reduced impact on the environment.
After exactly sixty years, RWE returns to the gas business. In exchange for shares in ‘Isarwerke GmbH’, RWE acquires a 50 per cent share in the long distance gas supplier ‘Thyssengas GmbH’, Duisburg from Bayernwerk AG.
The reorganisation of the RWE group introduced in 1990 is now reflected in architectural terms. RWE AG moves into new headquarters at the Opernplatz in Essen. The tower’s simplicity and transparency set a new mark in urban development within the Ruhr area.
LAYMEYER AG, Frankfurt/Main, is the new management company for the corporate division of Mechanical and Plant Engineering / Telecommunications. LAYMEYER is the result of the merger between the former management company ‘Lahmeyer AG für Energiewirtschaft’ and ‘Rheinelektra AG’.
The end of the telephone monopoly is set for 1998 and both VEBA and RWE aim to become major private competitors of the ‘Deutsche Telekom’. VEBA AG and RWE AG merge their domestic telecommunications business into ‘o.tel.o Communications’, a joint venture based in Düsseldorf. During the course of the year, the company is able to increase its share in ‘E-Plus’, the mobile phone company, to a majority stake.
In an indirect way VEW is able to expand its gas business. The monopolies commission has reservations about the originally planned merger of VEW and WFG. So both companies set up the new company WGV, ‘Westfälische Gasversorgung AG & Co. KG’. WGV then takes over gas purchasing and transport operations from WFG and VEW Energie. In January 2000, WGV is amalgamated by WFG. At this point VEW AG holds the majority share in the enlarged WFG and integrates the company into the group as the fifth management company.
After several years of wrangling, the multiple voting rights criticized by analysts and investors, are eliminated at no cost to RWE: the municipal shareholders sell their multiple voting rights to preference shareholders who thereby convert their non-voting shares into voting common shares. Following determination of the conversion premium by a bookbuilding process in April, 135 million preference shares are converted into common shares until June 25. The local authorities now control 30 per cent of the votes.
The reorganisation process in the group division Waste Management, underway since mid-1997, comes to a close. Under the new name of Environmental Services and the renaming of ‘RWE Entsorgung AG’ in ‘RWE Umwelt AG’, the company now focuses on four business lines: Waste Disposal and Recycling Germany, Waste Disposal and Recycling International, Environmental Consulting and Water/Waste Water.
DEMINEX’ drilling operations and production work are shared out between its associated companies. DEMINEX, ‘Deutsche Erdölversorgungs-GmbH’, was set up in 1969 on the instigation of the German Federal Government. RWE-DEA now takes over the majority holding in former Deminex operations in Norway and Egypt and in the future increases efforts to locate mineral oil and natural gas.
After the market opening at the beginning of 1998, the German telecommunications market becomes subject to fierce competition. Prices and margins suffer a dramatic fall. At the same time, the liberalization of the European energy market also heralds a radical repositioning in traditional fields of RWE activity. So in the summer of 1999, operations and resources are reorganized and refocused on the core business of power generation and energy-related services. Under the framework of this ‘Multi Utility/Multi Energy Concept’, the goal is to maintain a competitive edge in the long-term.
Against this background, RWE and VEBA part from major interests in telecommunications during the course of the year. Landline operations and the brand name ‘o.tel.o’ are sold to ‘Mannesmann Arcor’, the cable business operated by the o.tel.o-subsidiary ‘TeleColumbus’ is sold to the Deutsche Bank-subsidiary DB Investor. In October, RWE and VEBA finally sell their majority holdings in E-Plus, the mobile phone supplier, to France Telecom.
RWE Energie expands its operations in the energy trade. The company sets up RWE Energy Trading Limited in London which by the end of the year handles electricity in physical terms and trades with other power sources such as coal, oil and gas in derivatives. The traders in London get back office support from RWE Energie in Essen which is also responsible for risk controlling.
RWE participates in the partial privatisation of BWB, the Berlin water suppliers within a consortium. The consortium acquires a 49.9 percent share in the ‘Berliner Wasserbetriebe’ which provides drinking water for 3.5 million people within Berlin and wastewater services for 3.9 million.