EPH seen as favourite for major portfolio of brown coal energy assets in Germany

Photo: Edal Anton Lefterov, CC BY-SA 3.0

Czech energy group EPH teamed up with PPF Investments, the vehicle of the Czech Republic’s richest man, Petr Kellner, is said to be on the verge of another major acquisition, this time in Germany. The deal is focused on brown coal assets but that fits in well with the Czech company EPH’s existing activities.

Photo: Edal Anton Lefterov, CC BY-SA 3.0
The news agency Reuters, citing three separate sources, says the EPH bid for the brown coal mines, power plants, and small hydro portfolio of Swedish power company Vattenfall is now the frontrunner for the major power deal.

The sources say bids from two other contenders, namely Czech Coal and another partnership between German energy company Steag and Australian investment group Macquarie have effectively fallen by the wayside.

The problem with the Australian-German offer is reported to be the high contributions they want Vattenfall to make towards environment recovery costs and other future burdens. EPH has fewer misgivings and conditions and is reportedly also ready to make a bid which isn’t too much eroded by the high risks attached to this deal. Czech Coal is not commenting at the moment.

Vattenfall, a power company 100 percent owned by the Swedish state, decided to pull out of Germany because it polluting brown coal or lignite assets simply did not fit in with Berlin’s renewables oriented energy policy.

And the question of how quickly Germany might phase out the sort of coal fired power plants that Vattenfall owns there was one of the reason why Czech power company ČEZ decided not to bid. State owned ČEZ did though say it would remain on the sidelines and seek ways of doing a deal with Vattenfall if the situation changed.

EPH appears to believe that Germany’s brown coal phase out will be take longer than many predict.

So how well placed is EPH to seal another major deal. That was a question we put to Czech energy analyst Petr Hlinomaz.

“The chance that EPH is successful is lower, or more lower than higher. It’s not just about the amount of money but it’s a question about the German side and other circumstances. I think that ČEZ should be a better and more transparent partner for the German side and German government. So I think it’s a question if the deal will be done in the future.”

If EPH, which already owns German coal mines and power plants, does snap up the Vattenfall assets then it will become one of the biggest power players in Central Europe. In power generation terms it will double its capacity and be around a quarter as big again as ČEZ with almost 21 GW of capacity.

Already at the end of last year EPH sealed a deal to buy up at least a third of Slovakia’s biggest electricity producer Slovenské Elektrárne from Italian owner ENEL. That could become two-thirds if the Slovak government doesn’t use its option to boost its stake.

The acquisitions trail has come at a price, altogether EPH’s total debt is estimated at around 140 billion crowns.