Vattenfall Exits German Coal Sector

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Sweden's state-owned Vattenfall AB (Stockholm) has exited the German lignite mining and coal-fired power sector after agreeing to offload its loss-making business to Czech energy company Energetický a Prùmyslový Holding (EPH) (Brno) with its partner PPF Investments.

The deal will see the transfer of all of Vattenfall's lignite assets in Germany as it attempts to lower its CO2 emissions and reduce its exposure to low European electricity and coal prices. Those include the coal-fired power plants of Jänschwalde, Boxberg, Schwarze Pumpe and Vattenfall's 50% stake in Lippendorf, as well as the open cast mines Jänschwalde, Nochten, Welzow-Süd and Reichwalde along with the recently closed mine Cottbus Nord. Vattenfall was Germany's second largest coal mining company and the power plants have a combined generating capacity 8,000 megawatts (MW) and employ 7,500 employees.

EPH has agreed to take on €3.4 billion ($3.9 billion) of assets and €2 billion ($2.3 billion) of liabilities and provisions, including re-cultivation obligations. Last month, Industrial Info reported on the bidders facing off to take over the assets. For additional information, see March 22, 2016, article - Bidding Heats Up for Vattenfall's German Coal and Power Business.

"Today we have signed an important deal for Vattenfall," said Magnus Hall, Vattenfall's president and chief executive officer. "This divestment of our lignite assets is good strategically but also financially given current and expected market conditions. We are now accelerating our shift towards a more sustainable production. The sale means more than 75% of our production will be climate neutral compared to about 50% today. After thorough due diligence we are pleased to have found a well-established new owner for the lignite business with approximately 7,500 skilled and committed employees. EPH has proven expertise in lignite mining and is already present in Germany through its wholly-owned subsidiary MIBRAG."

He added: "We want to reduce our CO2 exposure, so for us this is the right thing to do and it frees up resources to focus more on renewable energy. We see significant risks when it comes to the development of future electricity price levels. There are also regulatory risks to take into consideration."

After the deal, Vattenfall's CO2 exposure will be reduced from more than 80 million tonnes to less than 25 million tonnes per year, the company stated.

Jan Špringl, member of the board of EPH, commented: "Based on our involvement and experience in the 'Mitteldeutsche Braunkohlerevier', we are convinced that EPH is well positioned to assume the responsibilities related to the ownership of Vattenfall's lignite assets in Germany in currently challenging market circumstances".

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