By Geert De Clercq and Christoph Steitz
BERLIN (Reuters) - Vattenfall's (VATN.UL) new chief says the Swedish utility will boost investment in Germany and neighbouring countries despite losing billions of euros in a disastrous foreign expansion drive over the past decade.
Magnus Hall, a forestry industry veteran who became Vattenfall chief executive in October, said the company will focus new investment on offshore wind, energy services and district heating and expects Germany to remain its main market, even after selling its lignite, or brown coal, activities there.
Vattenfall is the largest foreign-owned utility company in Germany and ranks fourth in the country behind E.ON (DE:EONGn) , RWE (DE:RWEG) and EnBW
But the state-owned utility is under pressure from the Swedish government to get out of its profitable lignite power business in Germany because it is heavily polluting.
Hall said Vattenfall plans to invest about 1 billion euros (1 billion pounds) a year in renewable energy, mainly offshore wind, in Germany, Denmark and Britain. It also plans to invest about 2 billion euros between now and 2020 in the Berlin power and heating grid, if keeps its power concession there.
In its Swedish home market, Vattenfall plans to invest half a billion euros in its ageing nuclear plants, Hall told Reuters in an interview at European utilities industry trade group Eurelectric's conference in Berlin.
Hall said that with a 50 percent market share of the Swedish power industry, Vattenfall has to keep a foreign focus.
"We will keep our international footprint. If we limited ourselves to our home market, we would meet ourselves in every new door we open," he said.
Germany's E.ON, Finland's Fortum (HE:FUM1V), Norway's Statkraft [STATKF.UL] and a series of municipally owned companies share the rest of Sweden's power market.
COAL LEVY FEARS
Vattenfall earns 60 percent of its revenue abroad and 75 percent of its investment is outside Sweden, as renewable energy incentives are more generous in neighbouring countries.
But few European utilities have fared worse with their foreign expansion than Vattenfall, which had to write down more than half the nearly 10 billion euros it paid for Dutch utility Nuon in 2009 and to provision four billion euros on its German reactors after the country decided to phase out nuclear power.
Besides the pressure at home to get out of the brown coal business, it also fears a new German levy on coal could force it to close more than a third of its German lignite plants, which it hopes to sell by year end anyway.
"Under the worst-case scenario, the latest government proposal, the capacity at risk is 3,000-4,000 megawatt out of a total of 9,000 MW," he said.
The Germany government has floated the idea of a coal levy, or a tariff on the biggest polluters, though no specific details have been made public as yet.
Hall declined to say at what price its German lignite mines and power plants are booked in the company's accounts, nor how much he hopes to get for them, but they have been estimated at 2 to 3.5 billion euros.
Hall said he is still aiming for a sale by the end of 2015 but will not sell at any price: "There is also a walk-away position."
He said the bidding cannot start until there is clarity on the coal levy and refused to identify potential buyers. Czech energy groups CEZ (PR:CEZP) and EPH have publicly expressed interest in the plants.
Germany's government has said it will make no decision on the levy before reviewing the impact on jobs.
RENEWABLES
Hall said a sale of its lignite assets would not mean a retreat from Germany, which will remain its biggest market.
"The money we raise from the lignite sale will be reinvested in Germany," he said, adding that about 60 percent of the firm's total investments go to Germany.
Besides renewable energy, Vattenfall's two main development areas will be energy services and district heating.
Vattenfall helps its customers install solar panels and heat pumps and does residential energy audits.
Low margin and not capital intensive, the customer and solutions division accounts for 9 billion euros in sales, about half the firm's 18 billion euro revenue, and employs 3,200 out of 30,000 staff, but accounts for only five percent of earnings before interest, tax, depreciation and amortisation (EBITDA).
Vattenfall is also a specialist in combined heat and power (CHP) plants and hopes to hang onto its district heating contract with the city of Hamburg, which has the option to buy back its heat grid in 2019. It bought back its power grid from Vattenfall after a referendum a few years ago.
Berlin will also decide whether to keep its electricity grid concession with Vattenfall, or find a new partner.
In Sweden, Hall said V
By Geert De Clercq and Christoph Steitz
BERLIN (Reuters) - Vattenfall's (VATN.UL) new chief says the Swedish utility will boost investment in Germany and neighbouring countries despite losing billions of euros in a disastrous foreign expansion drive over the past decade.
Magnus Hall, a forestry industry veteran who became Vattenfall chief executive in October, said the company will focus new investment on offshore wind, energy services and district heating and expects Germany to remain its main market, even after selling its lignite, or brown coal, activities there.
Vattenfall is the largest foreign-owned utility company in Germany and ranks fourth in the country behind E.ON (DE:EONGn) , RWE (DE:RWEG) and EnBW
But the state-owned utility is under pressure from the Swedish government to get out of its profitable lignite power business in Germany because it is heavily polluting.
Hall said Vattenfall plans to invest about 1 billion euros (1 billion pounds) a year in renewable energy, mainly offshore wind, in Germany, Denmark and Britain. It also plans to invest about 2 billion euros between now and 2020 in the Berlin power and heating grid, if keeps its power concession there.
In its Swedish home market, Vattenfall plans to invest half a billion euros in its ageing nuclear plants, Hall told Reuters in an interview at European utilities industry trade group Eurelectric's conference in Berlin.
Hall said that with a 50 percent market share of the Swedish power industry, Vattenfall has to keep a foreign focus.
"We will keep our international footprint. If we limited ourselves to our home market, we would meet ourselves in every new door we open," he said.
Germany's E.ON, Finland's Fortum (HE:FUM1V), Norway's Statkraft [STATKF.UL] and a series of municipally owned companies share the rest of Sweden's power market.
COAL LEVY FEARS
Vattenfall earns 60 percent of its revenue abroad and 75 percent of its investment is outside Sweden, as renewable energy incentives are more generous in neighbouring countries.
But few European utilities have fared worse with their foreign expansion than Vattenfall, which had to write down more than half the nearly 10 billion euros it paid for Dutch utility Nuon in 2009 and to provision four billion euros on its German reactors after the country decided to phase out nuclear power.
Besides the pressure at home to get out of the brown coal business, it also fears a new German levy on coal could force it to close more than a third of its German lignite plants, which it hopes to sell by year end anyway.
"Under the worst-case scenario, the latest government proposal, the capacity at risk is 3,000-4,000 megawatt out of a total of 9,000 MW," he said.
The Germany government has floated the idea of a coal levy, or a tariff on the biggest polluters, though no specific details have been made public as yet.
Hall declined to say at what price its German lignite mines and power plants are booked in the company's accounts, nor how much he hopes to get for them, but they have been estimated at 2 to 3.5 billion euros.
Hall said he is still aiming for a sale by the end of 2015 but will not sell at any price: "There is also a walk-away position."
He said the bidding cannot start until there is clarity on the coal levy and refused to identify potential buyers. Czech energy groups CEZ (PR:CEZP) and EPH have publicly expressed interest in the plants.
Germany's government has said it will make no decision on the levy before reviewing the impact on jobs.
RENEWABLES
Hall said a sale of its lignite assets would not mean a retreat from Germany, which will remain its biggest market.
"The money we raise from the lignite sale will be reinvested in Germany," he said, adding that about 60 percent of the firm's total investments go to Germany.
Besides renewable energy, Vattenfall's two main development areas will be energy services and district heating.
Vattenfall helps its customers install solar panels and heat pumps and does residential energy audits.
Low margin and not capital intensive, the customer and solutions division accounts for 9 billion euros in sales, about half the firm's 18 billion euro revenue, and employs 3,200 out of 30,000 staff, but accounts for only five percent of earnings before interest, tax, depreciation and amortisation (EBITDA).
Vattenfall is also a specialist in combined heat and power (CHP) plants and hopes to hang onto its district heating contract with the city of Hamburg, which has the option to buy back its heat grid in 2019. It bought back its power grid from Vattenfall after a referendum a few years ago.
Berlin will also decide whether to keep its electricity grid concession with Vattenfall, or find a new partner.
In Sweden, Hall said Vattenfall's two oldest nuclear reactors in Ringhals need to be closed because low power prices would not allow the firm to recuperate the 100 million euros per reactor needed to extend their lifespan beyond 2025.
Instead, it will invest that amount installing independent core cooling systems and other post-Fukushima safety measures in its five other nuclear plants to keep them going until 2040-45.
The two Ringhals reactors will be closed between 2018 and 2020 with a one-year interval between the two, he said.
($1 = 0.9074 euros)