The board of Germany’s RWE has decided to take action in the face of persistently low market prices and the challenges of the country’s energy transition by approving a plan to carve out its renewable energy operations and sell a stake in them by the end of 2016.

The German government, through its Energiewende policy, is targeting a 40-45 per cent contribution froPeter Teriumm renewables by 2025 and while RWE (FWB: RWE) consistently denied they would take such a drastic step, it has now recognised the need to increase its presence in the renewables market while simultaneously reducing its conventional power capacity.

“This decision sends the clear signal that we have found our answer to the transformation of the energy system,” said Peter Terium, the utility’s chief executive.

RWE will create a new company, bundling together its renewable, power-grid and retail businesses that will begin operations next year. RWE said it would sell a stake of 10% or more in the company in an initial public offering at the end of 2016. Though RWE didn’t rule out the sale of additional stakes at a later point, it said it would retain a majority holding in the new venture.

Fitch Ratings placed RWE on ratings watch negative, predicting the new structure would “create an extra layer of complexity and uncertainty for RWE’s creditors.”