BRK.A Berkshire Hathaway Inc

FRANKFURT—Germany's E.ON SE came under renewed criticism on the weekend from investors who compared its breakup strategy unfavorably with that of RWE AG, a rival utility that floated its renewable power business on Friday.

"RWE's move to spin off the renewables unit was the smarter move," said Thomas Deser, a portfolio manager with Union Investment, which holds 0.5% in E.ON.

Both E.ON and RWE have pursued radical splits in response to changes in German energy policy, with the government pushing the country toward renewable power and away from fossil fuels and nuclear energy. The shift has left utilities with billions in losses and liabilities related to shutting down nuclear plants.

RWE spun off 25% of its renewables, retail and grid operations in Innogy SE Friday, giving the unit a clean break from conventional energy and raising 5 billion euros ($5.6 billion) in proceeds. E.ON did the opposite in September, floating more than 50% of its conventional coal and gas activities as Uniper SE.

Mr. Deser and analysts said RWE took a better path. The proceeds raised from floating new shares in Innogy ensured RWE was well-funded and could meet future liabilities, Mr. Deser said. The proceeds will help RWE pay potential liabilities connected to winding down nuclear plants and storing waste.

E.ON's spinoff of Uniper didn't generate funds because the utility distributed Uniper shares to its own shareholders. E.ON itself now focuses on renewables but also retains German nuclear operations, meaning both E.ON and Uniper are saddled with troubled businesses.

Knight Vinke, another large investor in E.ON, is also disappointed. Founder Eric Knight told The Wall Street Journal this weekend his fund presented an alternative deal structure in August that would have brought well above €2 billion in fresh capital to E.ON and Uniper.

Knight Vinke said it would have injected €600 million into E.ON and acquired the 47% Uniper stake E.ON still holds in a step that valued the unit at €3 billion.

People familiar with the matter said Knight Vinke's plan piqued the interest of potential co-investors, including Warren Buffett's Berkshire Hathaway Inc. The investment company didn't respond to an email seeking comment.

E.ON decided against the plan because it would have triggered a hefty tax payment and because the company believed the proposal undervalued Uniper, according to people familiar with the matter. E.ON declined to comment.

"There are more uncertainties around E.ON because they need to raise capital for nuclear liabilities at a depressed share price level. They could alternatively sell some assets but not too many because that could compromise the attractiveness of their shares," Union Investment's Mr. Deser said.

Analysts have echoed those concerns. Barclays Capital said in a recent note that worries about E.ON's capital strength would persist even it if launched a "€2.4 billion capital increase to cover the expected nuclear" expenses.

Knight Vinke continues to push E.ON management to consider other measures aimed at cleaning house, including selling its grid unit, people familiar with the matter said.

Knight Vinke declined to comment except to say it looked forward "to continuing the very cordial and constructive relationship with both E.ON and Uniper."

Monica Houston-Waesch contributed to this article.

Write to Eyk Henning at eyk.henning@wsj.com and Giles Turner at giles.turner@wsj.com

(END) Dow Jones Newswires

October 09, 2016 21:35 ET (01:35 GMT)

Berkshire Hathaway (NYSE:BRK.A)
Historical Stock Chart
From Mar 2024 to Apr 2024

Berkshire Hathaway (NYSE:BRK.A)
Historical Stock Chart
From Apr 2023 to Apr 2024