Philip Blenkinsop and Barbara Lewis for Reuters:
Regulators cleared on Thursday Swedish utility Vattenfall’s sale of German lignite power plants and coal mines in a deal that will see it divest some of the most polluting fossil fuel generation.
The deal has whipped up controversy because the operations are being sold to a new operator rather than closed down.
Analysts say the economics of fossil fuel versus renewables have shifted as sources such as wind and solar become cheaper and the regulatory pressure mounts to scrap carbon-intensive coal.
EPH teamed up with Czech private equity group PPF Investments, to buy the lignite coal assets from Vattenfall for a nominal fee. EPH has said the assets were among Germany’s most efficient lignite operations and would be among the last to closed without indicating when that might be.
Once they are shut down, the owners will have to rehabilitate the area, which Vattenfall estimated would cost 1.4 billion euros. ($1.6 billion)
A report from the Institute for Energy Economics and Financial analysis published on Thursday concluded that could be an underestimate and suggested an upper cost of 2.6 billion euros based on previous clean-up bill.
EPH and PPF could still make a profit, especially as the price of pollution permits, stuck at around 4 euros a tonne , is very low.
The Vattenfall sale demonstrates investors will continue in coal until there is regulatory certainty coal-fired generation must end, analysts say.
“The EPH sale highlights the lack of clarity over the role of lignite, the dirtiest form of coal, in Europe, and the broader regulatory uncertainty over any phase-out,” IEEFA analyst Gerard Wynn said.