Swedish state-owned power company Vattenfall has signed an agreement divest its coal mines and associated power plants in Germany to Czech energy company EPH and its financial partner PPF Investments.
Under the terms of the deal, EPH and PPF Investments will acquire Vattenfall’s power plants Jänschwalde, Boxberg, Schwarze Pumpe as well as the recently closed mine Cottbus Nord.
The power plants have a combined power generation capacity of 8000MW with total 7,500 employees.
The assets considered for the sale also include Vattenfall’s 50% stake in Lippendorf, as well as the open cast mines Jänschwalde, Nochten, Welzow-Süd and Reichwalde.
EPH said the deal involves acquiring over €3.4bn ($3.8bn) worth of assets and €2bn in liabilities and provisions. It also includes future decommissioning of power plants and mines.
Vattenfall president and CEO Magnus Hall said: "This divestment of our lignite assets is good strategically but also financially given current and expected market conditions. We are now accelerating our shift towards a more sustainable production.
"The sale means more than 75% of our production will be climate neutral compared to about 50% today."
The divestment is comes in line with Vattenfall’s effort to reduce CO2 exposure while focusing on further developing in wind, district heating, distribution networks and customer-centric energy services.
Magnus Hall added: "We see significant risks when it comes to the development of future electricity price levels. There are also regulatory risks to take into consideration."
Subject to approval by the Swedish government and customary regulatory approval, the transaction is planned to be completed in the third quarter of 2016.
EPH is expecting that the energy prices will recover in Europe.
EPH board member Jan Špringl said: "On a mid-term perspective, the fundamental dynamics of the energy market are set to recover.
"With our relevant industry expertise and a cost-disciplined and efficient management of operations we are convinced that lignite is in a position to contribute successfully to the rapidly evolving German power mix."
Image: Vattenfall’s Boxberg power station in Germany. Photo: courtesy of Vattenfall.