Vattenfall remains committed to German lignite electricity generation says CEO

29 April 2014 15:53 Source:ICIS

Although Vattenfall faces regulatory risk in its markets, it remains committed to its relatively carbon intensive German lignite power generation, the utility’s CEO Oysein Loseth said during an analyst call on Tuesday.

The company’s rising lignite-fired power generation in Germany over the recent years has come under criticism by some politicians as it runs counter to the country’s goal of reducing carbon emissions.

There was currently “no mandate” by the owner of the utility, the Swedish government, to sell its German assets, Loseth said during an analyst call on Tuesday. Last year, Vattenfall split its business in a Nordic and a combined continental and UK division aiming to share risk ( see EDEM 5 December 2013 ).

Loseth said that despite political will to reduce emissions there was also the “physical reality” that conventional power plants, including lignite, would be needed as back-up for intermittent renewable power generation in the foreseeable future.

On Monday, Vattenfall received a boost for its German lignite mining operation from a state expert committee in Brandenburg which voted in favour of starting to mine more lignite in the region in the middle of the next decade.

In the current low wholesale energy price environment, the profitability of Vattenfall’s German lignite plants is likely to hold up better than hard coal or natural gas fired power plants.

Vattenfall’s earnings before interest, tax and depreciation in its continental and UK generation division increased 22% year on year to 4.3bn (€473m) in contrast to the 15% year on year drop to SEK 3.3bn in its Nordic generation division. The continental/UK generation is mainly made up by thermal power plants (including lignite) whereas hydro power dominates its Nordic generation business.

The result was up despite a mild winter in the Nordics and mainland Europe capping electricity generation and profit margins for utilities in Q1.

Vattenfall’s electricity generation decreased to 50.1TWh compared to 52.2TWh in Q1 ’13. “On account of warm weather, our revenues fell as a result of lower electricity prices and lower sales of heat and gas, although this was largely compensated by forward hedges,” said Oystein Loseth, president and CEO of Vattenfall. Martin Degen

By Martin Degen