Evonik to Sell 51% Stake in Power Plant Unit Steag to Group of Local Municipalities

Essen-based  Evonik Industries AG agreed to sell an initial 51% stake in its power plant unit Evonik Steag GmbH (Steag), Germany’s fifth largest electricity producer to a group of local municipalities, many newspapers including Rheinische Post and Handelsblatt reported.

The purchase price is said to be EUR 649 million. The consortium consisting of the utilities of the cities and towns of Essen, Duisburg, Dortmund, Dinslaken, Bochum and Oberhausen was reportedly granted the option to acquire the remaining 49% share. It might be possible that the consortium will look for another partner when buying the rest of the Steag shares, Rheinische Post says. Alledgedly, the cities of Cologne and Hagen are interested. According to Rheinische Post, North Rhine-Westphalia’s Environment Minister Johannes Remmel wants the consortium to examine the possibility of including an international investor.

Steag operates coal-fired power plants at eight locations in Germany, refinery power plants at two sites and a variety of facilities to generate energy from renewable sources. Internationally, Steag has coal-fired power plants in Colombia, Turkey and the Philippines. Total installed capacity amounts to around 9,400 MW worldwide, including around 7,700 MW in Germany.

The acquisition underlines the current trend to a remunicipalisation of the energy sector in Germany. While many municipalities at least partially withdrew from the energy market in the context of the liberalisation of the German energy market in 1998, many municipalities are now working on playing a more active role again. With many concessions or license agreements for power lines expiring in the near future, municipalities are reconsidering to regain control of the grid and supply customers with energy themselves.

By joining forces, public utilities strive to compete with the major players in the German market, RWE AG, E.ON AG, EnBW AG and Vattenfall. They are often aided by politics. In North Rhine-Westphalia, were Evonik Steag is located, the ruling coalition of Social Democrats (SPD) and Greens is planning to facilitate energy activities of municipalities.

The Steag involvement by the consortium of municipalities shall be for the large part (70%) debt-fiananced, adding to the often high debts of the consortium partners.

Sources: Rheinische Post, Handelsblatt