German utilities, E.ON and RWE, have come to an agreement on a deal that is set to transform the German energy industry.

E.ON has agreed to take over a 76.8 per cent stake of utility company RWE’s subsidiary Innogy in exchange for a far-reaching range of assets from E.ON’s renewables and gas storage business.

In exchange RWE has been granted an effective participation of 16.67 percent in E.ON, and will pay the company EUR1.5bn.

The company added: “E.ON would transfer to RWE most of E.ON’s renewables business.”

The agreement is considered a major restructuring of Germany’s energy market and comes in the wake of Chancellor Angela Merkel’s 2011 decision to abandon nuclear power and focus on renewable energy sources. Merkel made the policy switch after Japan’s Fukushima nuclear disaster.

In effect, the deal will see E.ON concentrate on retail and networks, while RWE focuses on renewables and other forms of generation.

Once the deal goes through, E.ON plans to integrate Innogy into its existing business. RWE plans to combine Eon and Innogy’s renewables businesses into what it called a “leading European utility for renewables and security of supply with a broadly diversified portfolio of renewable and conventional generation assets”.

The agreement is subject to approval from both companies’ boards, and regulatory and anti-trust approvals.