March 30, 2020 Read More →

European utilities continue their exit from coal-fired electricity generation

S&P Global Market Intelligence ($):

Utilities in Europe are continuing to move on from coal power after a challenging price environment led to billions in write-downs and a wave of early closures in 2019, with government phaseouts set to cut down the list of remaining power plants even further in the coming years.

Francesco Starace, CEO of Enel SpA, said on March 19 that the Italian utility’s renewable power projects had produced more electricity than all of its thermal plants combined over the previous year, a major turning point for one of the world’s largest power groups.

The balance in its portfolio will continue to shift: Enel subsidiary Endesa SA announced in November 2019 that it plans to close all of its remaining coal plants in Spain and Portugal within the next two years after recording €1.47 billion in impairments on the assets. Enel has also closed coal plants in Italy and Chile, and recorded more than €4 billion in total write-downs related to the fossil fuel in 2019.

Companies including Iberdrola SA, Engie SA and Vattenfall AB have closed or sold off large shares of their coal-fired capacity in recent years, instead building less emissions-intensive gas plants and taking advantage of the subsidized shift to renewables. Private groups like Energetický a prumyslový holding a.s., a Czech investor, and U.S.-based private equity firm Riverstone Holdings LLC have snapped up many of the assets, although traditional utilities still own vast amounts of coal plants across Europe.

Enel’s Starace said proactively shutting down coal capacity protects the company from future action by policymakers to drive down emissions. “The coal phaseout will minimize the risks associated with the foreseeable acceleration of regulatory constraints aimed at mitigating climate change,” Starace said. In a sign of its declining profitability, coal still made up 16% of Enel’s total power production but only 2% of its EBITDA in 2019. European carbon prices have dropped amid the recent economic slowdown related to the coronavirus, but could rebound in the long run as the EU artificially tightens supply.

Enel is far from the only company turning its back on coal. Germany’s Uniper SE announced in January that it would close all but one of its coal plants in the country by 2025, in part to take advantage of auctions that will see operators compensated for early closures. Uniper recorded just over €1 billion in impairments in 2019, mainly related to its fossil fuel plants in the Netherlands, the U.K. and Germany.

[Yannic Rack]

More ($): European utilities turn the page on coal power after challenging year

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