SWEDISH energy firm Vattenfall is to sell its German lignite business to Czech consortium of energy holdings company EPH and financial partner PPF.
Around 7,500 people are employed in Vattenfall’s lignite business. Its assets include the Jänschwalde, Boxberg and Schwarze Pumpe power stations and Vattenfall’s 50% stake in the Lippendorf power station, as well as open-cast lignite mines in Jänschwalde, Nochten, Welzow-Süd, Reichwalde and Cottbus Nord.
Vattenfall CEO Magnus Hall says that the company wants to shift towards sustainable energy generation, and with the sale of the lignite business, more than 75% of its energy will be climate neutral, compared to 50% at present.
Lignite still provides around 25% of Germany’s electricity needs, despite the country’s ‘Energiewende’, or energy transition, introduced in 2000 and ramped up in 2011 following the Fukushima disaster, with the aim of shifting energy generation from fossil fuels and nuclear power to renewables. Current estimates suggest that Germany will generate 40% of its energy from renewables by 2020. The policies have resulted in an energy surplus in Germany, and a significant drop in the wholesale price of electricity.
Hall said that there are “significant risks when it comes to the development of future electricity price levels”, as well as regulatory concerns relating to CO2 emissions. However, he reiterated Vattenfall’s commitment to Germany.
“As an international energy company with the ambition to be one of the leaders in the new energy landscape it is important for us to take an active part in the German ‘Energiewende’. Germany will remain an important market for Vattenfall. It is not only one of the largest energy markets in Europe, but also a frontrunner in the energy transition,” he said.
EPH already owns a lignite mine in Germany, through wholly-owned subsidiary MIBRAG, but says this will be operated separately to the Vattenfall business. EPH board member Jan Špringl said that he is confident that EPH is well-positioned to run the business despite the “challenging market circumstances”. The company intends to retain all existing staff.
Špringl added. “We are convinced that we can contribute to reaching the ‘Energiewende’ targets, positively contribute to energy security and affordability and to social and economic welfare. In close cooperation with the works council, trade unions, federal and local governments as well as communities and other stakeholders, we want to support the transition that will be necessary to achieve the Energiewende targets as well as to develop new prospects for future generations.”
The sale price has not been disclosed but Vattenfall says it will record a write-down in its Q2 income statement of SEK22bn–27bn (US$2.7bn–3.3bn). However, it says this is a lower negative impact than if the company retained the business. The deal still requires regulatory approval and the approval of Vattenfall’s owner, the Swedish state.
Vattenfall is continually looking to lower its emissions. It recently formed a consortium with steelmaker SSAB and iron pellet supplier LKAB to develop a steel production process that uses hydrogen to reduce iron ore and does not emit any CO2.
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