In a joint statement issued today, Swedish state-owned power group Vattenfall and Mirant, the US energy company, have agreed to pool their German interests in order to form a “Neue Kraft” (new force or power) in the German energy market – predicted to be the third largest after the dominant Eon and RWE.

Vattenfall and Mirant will co-operate in the integration of four German power companies – HEW, the Hamburg power group; Veag, eastern Germany’s main utility; Bewag, a Berlin utility; and Laubag, a lignite mining operation. The new conglomerate will start operating by January 1 2003 at the latest, according to Lars Josefsson, Vattenfall’s chief executive.

The two companies, together with the Free and Hanseatic City of Hamburg will be the main owners of the, yet to be named, company. In their statement, Mirant and Vattenfall said they shared the same vision for the creation of a leading German energy company. “HEW, Bewag, VEAG and Laubag have established a sound basis for this – each of these companies is successful on the market and they have begun the process of mutual integration”, said Josefsson in Berlin.

“If we join forces, we will be more successful in creating the New Force from the four companies,” said Barney Rush, president of Mirant Europe.

The two companies’ shareholdings in the “New Force” will have a balance sheet value of about 15 billion Euro ($12.9 bn) and produce some 80 TW a year of electricity out of total German power demand of 500 TW. It will have 3.3 million private customers, with the main population centres being Berlin and Hamburg.

Vattenfall is expected to hold about 70 per cent of the new group, once it has acquired shares held by the City of Hamburg in HEW. Mirant will hold the remaining 30 per cent, based on the assets it is contributing to the company.

Vattenfall, the Nordic region’s biggest power group, has been keen to expand outside its Swedish stronghold due to increasing competition and limited prospects for growth. It has moved swiftly to take advantage of the deregulation of the German power market and similar liberalization in a number of other European countries.