Negotiations between Mirant and Vattenfall on the possible combination of Bewag, VEAG, Laubag and HEW into a major force in Germany’s power sector, the so-called Neue Kraft venture, have been terminated. Mirant, which owns around 45 per cent of Berlin utility Bewag, raised questions about the underlying partnership which led to the decision to abandon the venture.
In May Mirant and Vattenfall concluded a long battle over the ownership of Bewag and agreed in August to hold equal stakes of 44.76 per cent of Bewag’s capital stock, clearing the way for plans to rival E.on and RWE in the German utilities market. However, Vattenfall’s announcement that it had unilaterally chosen an executive to run the utility led to a lack of confidence in the venture on the part of Mirant. Other issues that affected the talks included outstanding questions over the valuation of assets, financing of debt-ridden Veag, compensation for minority shareholders in Veag and HEW and liability costs concerning HEW’s 80 per cent nuclear base.
Some analysts have suggested that Mirant had expected too much control in the venture given its minority stake. Final details of the alliance had not been confirmed, but it appeared likely that the state-owned Swedish power giant would have controlled a majority stake of some 65 – 70 per cent. Nonetheless Vattenfall plans to push ahead and form a joint venture, Neue Kraft, without Mirant, having spent around $2 billion on German acquisitions.
Concerns have been raised that Mirant will now face difficult decisions in expanding its operations in Germany following the collapse of the partnership. Although opportunities to purchase municipal utilities exist, the experiences of other players have shown this route to be problematic. One of the main difficulties has been the very low rate of switching by German consumers.
Mirant also plans to venture into Europe with a greenhouse gas reduction programme. Mirant sees Europe as offering the best opportunities for investment in renewable energy given the renewables targets set by several EU countries.