Vattenfall has received a binding offer for its lignite assets in Germany, but the company’s general difficulty in offloading its coal-fired power fleet in Germany is greatly troubling the states affected.

Lignite miner Vranska Uhelna, part of Czech Coal, has made a binding offer for the assets while CEZ has decided to drop out. Meanwhile another potential suitor said Vattenfall would have to contribute money itself to keep the loss-making operations running.

Vattenfall logo
Germany’s energy group Steag and Australian investment fund Macquarie proposed setting up a foundation to manage lignite assets, requiring Vattenfall to put in about €2bn ($2.2bn), a source familiar with the process said.

 

The foundation model would ensure that no cash will flow out of the loss making operations, and no dividends will be paid, and it could safeguard against faster decommissioning of lignite power plants.

Bidding offers must be concluded today, the 16th of March.

Handelsblatt newspaper reports that the governments of Saxony and Brandenburg are keen to see a smooth transition for the declining industries, however the Swedish state-run company has, proven unable to find a buyer willing to pay billions for an increasingly diminishing business.

“The issue is of great importance to us,” Albrecht Gerber, the state of Brandenburg’s economics minister, told Handelsblatt.

The brown coal-fired power plants and open pit mines in the Lusatia region near the Polish border supply thousands of people in Brandenburg with jobs, he added. “These jobs must be protected in the long term.”

Germany’s Energiewende policy, the transition to renewable energy and a subsequent plunge in wholesale energy prices has eroded the company’s brown coal operation which includes four plants and four mines, once valued at €2bn ($2.2bn).

Although Vattenfall added 10 hydroelectric power plants to sweeten any potential deal, the prospect of securing a €2bn deal is no longer realistic.

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