RWE and Steag in legal contest over coal-fired power plant

Germany’s biggest power producer’s plans to close a loss-making coal-fired power plant in North Rhine-Westphalia are being contested by Steag, a majority co-owner of the facility.

RWE is targeting the Voerde coal-fired plant for early closure in line with the company’s efforts to adapt to Germany‘s energy transition, or Energiewende, which has seen fossil plants become increasingly unprofitable as more solar and wind power facilities are added to the grid.
Voerde coal-fired plant
Surprisingly RWE is, with a 25 per cent share, a minority shareholder in the two-unit 1522 MW plant, Steag owning the remaining 75 per cent.

According to Handelsblatt, Steag Chief Executive Joachim Rumstadt has taken issue with the prospect of the closure and has taken the matter to the German cartel authorities.

“We do have a legal dispute with RWE over the Voerde power plant,” confirmed a spokeswoman for Steag to the newspaper.

The detail behind the dispute explains why the minority stakeholder appears to have the power to call for the plant’s closure.

RWE’s request is based on a contract clause from 1975. At that time, 25 years before Germany deregulated its energy market, the two companies launched a partnership. Steag planned and constructed the power plant, and has operated it since 1982. The two units ” each with an installed capacity of approximately 761 MW ” have been upgraded several times. Together, they are capable of producing more power than many nuclear plants.

Despite Steag owing 75 per cent, RWE was given latitude, by contract, to request at the end of each September that the plant be permanently shut down within one year. RWE confirmed that it exercised its contractual right to do so.

Dr Jurgen Frohlich, Communications spokesperson at Steag told Power Engineering International, “There is no closure of Voerde power plant. Our long-time partner RWE informed us that they want to decommission the plant.”

“STEAG has officially filed a complaint at the Federal Cartel Office (Bundeskartellamt). STEAG sees a stable long-term perspective for Voerde and would like to take over RWE shares if economically viable.”

However for RWE, the power plant has become a loss-making asset, which takes and sells all of the electricity produced by the plant.

Although highly profitable for years, the introduction of Energiewende has driven the market price for electricity on the European Energy Exchange, or EEX, in Leipzig under €30, or $32, per megawatt-hour. Four years ago, it was more than twice that.

RWE say part of its decision to request closure was motivated by the fact that over the last 12 months it was online for just 4,800 hours. This meant RWE had to take, and resell, a considerable amount of electricity at extremely low prices.

RWE spokeswoman Sabine Jeschke, told Power Engineering International the company was working together with its old partner to come up with options.

“Currently the economic burden is only with us and if there is a better solution to safeguard the employees we are always open to that discussion. We are a long time partner of Steag and we are really interested to come to a common solution with them.”

“Our goal really is to find a solution together with Steag that is commercially acceptable for us but might also be in favour of the partnership and the employees,” she added.

Unfortunately this is one in a series of contracts that have had to be cancelled between the once strong partnership and Steag’s management are adamant that because of changed conditions in the energy sector the 40 year old clause is no longer legally enforceable.

“The energy world has fundamentally changed since then,” a Steag spokeswoman said. “We will not let it happen like this ” and that is why we turned to the cartel office.” The company points to other contracts with RWE that were eliminated under pressure from antitrust authorities.

Mr. Rumstadt accuses his partner-turned-rival RWE of trying to take unfair advantage. RWE wants to take the plant offline to create a capacity shortage on the German market for the benefit of its own generating facilities, he said.

Steag also argued to the cartel office that the average wholesale price of electricity could climb 50 euro cents per megawatt-hour and is also concerned about the loss of around 300 jobs in Voerde.

But RWE doesn’t anticipate any antitrust issues. Their spokeswoman also said it had to make its request to shutter the plant for “formal legal reasons”.

Meanwhile RWE also announced that its 2015 profit will “just” meet its forecast after third-quarter earnings fell.

Adjusted net income this year will be 1.1 billion euros ($1.2 billion) to 1.3 billion euros, driven by earnings from Eastern Europe, the Essen-based company said Thursday in a statement. In the three months through Sept. 30, adjusted net income fell to 2 million euros from 14 million euros a year earlier, based on Bloomberg calculations using first-half and nine-month reports.

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