The European Commission has given its final approval for a €40bn-plus ($44bn) share and asset swap deal with rival utility E.ON that will make Germany’s RWE a major global player in green energy, with more than 9GW in renewable capacity.

Under the deal, RWE will bundle the renewable energy generation assets of its Innogy unit with those of E.ON, while E.ON will receive RWE’s customer service and grids segments.

“The agreements between RWE and E.ON will significantly spur the energy transition as they unite the strengths of the two companies and enable them to focus on their places in the value chain,” RWE chief executive Rolf Martin Schmitz said.

But while the new RWE will compete with peers such as Iberdrola, Enel or Orsted for dominance in the global renewables market, the German utility will also stay a major fossil power producer. It will initially keep 17.5GW of lignite and hard coal-fired capacity in Europe – a fact that is spoiling its green credentials and has increasingly put it in the mire of climate activists.

The new RWE is slated to invest a net €1.5bn each year in the expansion of its renewable energy portfolio, and from the start will rank second worldwide in offshore wind (behind Danish champion Orsted), RWE said.

“Scale plays a major role in achieving success when competing in the field of renewable energy at a global level. We are powerful enough for this market – in terms of financial strength, strategy and personnel,” RWE chief financial officer Markus Krebber said.

After the green light of competition authorities in Brussels, the transaction will now be executed in two steps.

First, RWE will transfer its 76.8%-stake in its Innogy subsidiary to E.ON. In exchange RWE will receive an equity interest of 16.7% in E.ON, along with a seat on the company’s supervisory board, which is to be filled by RWE CEO Schmitz.

E.ON by the end of this month will also transfer its key renewable activities to the new RWE, as well as minority interests in the soon-to-be-switched-off Emsland and Gundremmingen nuclear power stations.

Subsequently, Innogy’s entire renewable energy and gas storage business as well as a stake in Austrian utility Kelag will be re-integrated into RWE as quickly as possible next year.

E.ON will also receive financial compensation worth €1.5bn from RWE.