Vattenfall lignite sale comes under EU state aid microscope

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Attempts by Sweden’s state-owned power giant Vattenfall to offload its German lignite coal power operations appear to have been stalled at  EU level, according to reports in Germany.

A Vattenfall spokesperson told German media on Thursday that the sale to Czech utility EPH has been delayed and further reports from Germany today have stated that the European Commission is analysing the sale's legality under state aid regulations.

A Vattenfall spokesperson told Power Engineering International, "We still expect a closing of the deal in fall 2016, despite the approval process with the antitrust authority of the EU commission not proceeding in such a speedy manner as initially planned. In general we see no real issues."

The Swedish government-controlled utility agreed to sell its lignite assets in Germany in April because it wants to focus on renewables and cut exposure to fossil fuels. EPH, which already operates other lignite mines and power stations in Germany, said it expects the unit to become profitable as the country winds down its nuclear industry over the next six years and electricity prices start to recover.

Vattenfall sold the lignite operations for a symbolic price and will pay EPH a billion euro premium for the obligations of renaturalising former mines.

That the deal is merely being delayed is not a view shared by all observers.

Environmental law specialist ClientEarth have reacted to the news, with lawyer Ken Huestebeck telling Power Engineering International, "There has been a deplorable lack of transparency around the sale. The information we do have indicates EU state aid rules were not followed carefully enough. If this turns out to be true, it would be unlawful to close the deal.”

It now appears that the Swedish government will have to re-examine its legal obligations over the deal and the European Commission could issue an injunction if it believes a breach has occurred. Competitors that lost out at the time could also force the issue.
Lippendorf coal power plant
A month ago, Swedish Deputy Prime Minister Lövin justified her government‘s approval by saying there simply was no formal reason to block the deal.

Huestebeck says the action at EU level suggests that there are bigger risks than the Swedish government had admitted, and the divestment could betray not only Sweden’s climate ambitions but also its fiscal responsibility by engaging in this complex deal.

“In the worst case, Swedish taxpayers risk paying a triple bill: first, by providing the buyer EPH with billions of Euros to agree to the sale; second, by having to pay fines levied on Sweden which Sweden may find tough to recover from EPH if the state aid is eventually found not to comply with European law; and third, when global climate change materially affects Sweden and rest of the world.”

“If the Swedish government is not entirely sure about compliance with state aid rules, how can its citizens and the people in the affected German regions be expected to trust that it has considered all their legitimate concerns?”



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