EPH has agreed to buy loss-making lignite coal mines and an associated 8000 MW of coal-fired power plants in Germany from state-owned Swedish utility Vattenfall.

The Czech firm, which teamed up with PPF Investments, is gambling on a rise in power prices in Germany from 2020 due to a phase-out of nuclear power production.

The sale, which still needs to be approved by the Swedish government, would reduce Vattenfall’s electricity output by about 30 per cent, but also cut its carbon emissions by about 70 per cent, making it one of the greenest utilities in Europe.
Vattenfall logo
“On a mid-term perspective, the fundamental dynamics of the energy market are set to recover … we are convinced that lignite is in a position to contribute successfully to the rapidly evolving German power mix,” Jan Springl, board member of EPH, said.

EPH said the deal involves taking over $3.8bn worth of assets and $2.26bn in liabilities and provisions, including for future decommissioning of power plants and mines.

Vattenfall will also pay EPH about $1.9bn in cash which should enable the business to continue for several years until an expected price recovery takes place, EPH said.

Meanwhile, Vattenfall will retain $1.1bn in forward power sales contracts for 2016-2019, receiving cash as those contracts get settled over time.

The Swedish utility said the divestment will have a negative impact on its second-quarter income to the range of ($2.7-3.3bn), but retaining the assets could have meant bigger losses.