Swedish power company Vattenfall has agreed to sell its entire district heating business in Berlin, Germany to the State of Berlin for a price of around €1.6bn.

Furthermore, the State of Berlin has been given the option to acquire Vattenfall’s shares in GASAG, irrespective of the heat business sale.

Vattenfall’s heat business in Berlin has a workforce of approximately 1,700 employees. It provides hot water and heating to around 1.4 million residential units.

The company owns and manages 10 large-scale combined heat and power plants (CHP), along with 105 small block-type thermal power plants and various other facilities. Its heat network spans over 2,000 km in total length.

The sale encompasses the subsidiaries of Vattenfall Wärme Berlin, which include, among others, the ownership stake of 80.8% in Fernheizwerk Neukölln, Berlin and the complete shares in Vattenfall Energy Solutions and Energy Crops.

In GASAG, Vattenfall holds a stake of 31.57%. GASAG oversees the gas distribution networks in Berlin and neighbouring Brandenburg, serving as a primary regional supplier of natural gas to both industrial and residential customers.

Engie and E.ON are the other stakeholders in GASAG with stakes of 31.57% and 36.85%, respectively.

Vattenfall president and CEO Anna Borg said: “When we announced the strategic review in May 2022, Vattenfall already emphasised that, in the event of a sale, we would only sell to an investor that would continue the Berlin energy transition and our German heat business in line with our decarbonisation ambitions.

“Another premise was that the new owner is a reliable and fair employer. Both are a given with the state of Berlin as the buyer.”

The State of Berlin is anticipated to make significant additional investments in the next few years, aiming to generate 40% of district heating from renewable energy sources by 2030 and achieve climate neutrality by 2045.

Vattenfall and the State of Berlin intend to finalise the transaction in Q2 2024. The sale is contingent upon approval from the Berlin parliament and clearance from the Federal Cartel Office for merger control.