Vattenfall sells lignite operations in Germany, will focus on renewables and energy services

Written By: Stratton Report
April 18, 2016


On April 18, Vattenfall announced it will sell its lignite operations to Czech energy company EPH and its financial partner PPF Investments.

According to the firm, the divestment is a step in Vattenfall’s shift towards more sustainable production. Germany remains a strategic growth market for Vattenfall.

Magnus Hall, Vattenfall’s President and CEO noted:p class=”provocative-quote”]“Today we have signed an important deal for Vattenfall. 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 percent of our production will be climate neutral compared to about 50 percent 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,”[/p]

The new owner for the lignite operations is a consortium of two companies. EPH’s activities range from gas transmission, power and gas distribution, gas storage, heat infrastructure and power and heat generation. PPF Investments is an international finance and investment group, with focus on central and Eastern Europe and Asia.

The sale includes all of Vattenfall’s lignite assets in Germany.

According to Vattenfall, the buyer will take over the lignite business, with all its assets, liabilities and provisions. The assets include cash amounting to a total of 15 billion SEK ($1.85 billion). The liabilities amount to a total of 18 billion SEK ($2.23 billion). Hedges that Vattenfall has made to secure the electricity price for the lignite operations will remain in Vattenfall at a value of 9 billion SEK ($1.11 billion).

The result of the divestment in Vattenfall’s income statement by Q2 2016 will be in the range of minus 22-27 billion SEK ($2.72- $3.34 billion).

Hall continued: “We see growth opportunities in being the partner of choice for sustainable solutions for customers and cities. The number of our German customers is growing, today standing at more than 3 million. Starting from Berlin and Hamburg, we are also committed to offer economically and environmentally attractive developments and to further invest in partnerships with German cities.”

By concluding the deal, Vattenfall’s CO2 exposure will be reduced from more than 80 million tonnes to less than 25 million tonnes per year. At the same time it shifts the firm’s business focus in Germany. The divestment is part of Vattenfall’s overall strategy to focus on developing wind, district heating, distribution networks and customer-centric energy services.