Vattenfall and Mirant form ‘new force’ in Germany

Sweden’s Vattenfall and Mirant of the USA have agreed to merge their German interests to form a ‘new force’ in the German market. The two companies will integrate HEW, Bewag, Veag and Laubag and plan to use their experience in the energy field to create a leading energy company.

The companies will combine to create the third largest electricity producer in Germany. The new company, which has yet to be named, will start operating by January 2003 at the latest.

“Mirant and Vattenfall share the same vision: together we want to create a leading German energy company. HEW, Bewag, Veag and Laubag have established a sound basis for this project – each is successful on the market and they have begun the process of mutual integration,” explained Vattenfall’s President and CEO Lars G. Josefsson.

Vattenfall will hold approximately 70 per cent of the new group once it has acquired shares held by the City of Hamburg in HEW. Mirant will hold 30 per cent, reflecting its smaller asset contribution. The new company is expected to have a balance sheet value of 615bn ($12.9bn).

EDF expansion draws criticism

French state-owned electricity utility Electricit√© de France (EDF) is facing its most severe criticism yet from within Europe following its recent move to enter the Italian market. Both Italy and Germany have expressed their objection to EDF’s continued expansion, and are planning to enact legislation to curb foreign investment in utilities.

In May EDF purchased a initial stake in Italian conglomerate Montedison, the holding company for the generator Edison. It later revealed that its stake had risen to 20 per cent. The move caused outcry in the Italian power sector amid fears that EDF would try and break up Montedison to extract value from its energy holdings.

European governments are concerned that EDF is abusing a dominant position: it is able to purchase positions in the liberalized energy markets of EU member states, but its own domestic market is closed to foreign investors. The mounting political pressure has led the European Commission to investigate whether EDF benefits illegally from state aid.

Montedison is attempting to counter EDF’s moves and is planning to merge its energy subsidiaries, Edison and Sondel, to create the second largest electricity company in Italy. The company is also bidding for Enel’s subsidiary Elettrogen, and plans to triple gas sales by 2010.

UK launches energy review

The UK government is to carry out a comprehensive review of the nation’s energy supply to ensure that electricity and gas needs are met for the next 40 years. The study will take an in-depth look at the challenge of global warming and the role of nuclear power in security of supply.

The review is widely expected to lead to a revival in nuclear power, and will consider an expansion of renewable energy, combined heat and power, and energy efficiency measures. It will be led by energy minister Brian Wilson.

“We must not be complacent,” said Wilson. “In the future we expect to become more reliant on imports of fuel especially gas, which could eventually become a dominant source of our supplies.”

UEF bids for Elettrogen

Spanish utility Union Fenosa has confirmed that it has submitted a binding bid for Elettrogen, the first of three generating companies being sold by Italy’s Enel. A total of five binding bids have been received by Enel, which must announce the winning bid by mid-September.

Another Spanish utility, Iberdrola, has indicated that it had withdrawn from the bidding process, saying that Elettrogen did not appear to be an attractive acquisition in terms of its assets or profitability.

Other bidders are thought to include Edison and Sondel, Spain’s Endesa, AES, Energia Italia, and Italpower.

Elettrogen has a generating capacity of 5438 MW and serves seven per cent of Italy’s power market.

New engine order

A utility in northern Denmark has placed the first order for Caterpillar’s new 6.1 MW G16CM34 gas engine, which was formally launched at Power-Gen Europe in May. District heating company Saeby will replace a gas turbine-based heating system with two of the new engines, and expects to make savings of DKK10m ($1.2m, 61.34m) per year.

The new 750 r/min gas engine has a mechanical efficiency of 44.5 per cent and heat efficiency levels of 49.5 per cent. Saeby estimates that the payback for the entire project will be less than five years.

The Saeby scheme provides heating and hot water for 12 000 resident in the small town. The existing gas turbine-based system had been operating since 1989.

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