Czech oligarchs club together in bid to buy Vattenfall assets

By bne IntelliNews October 13, 2015

bne IntelliNews -


Czech energy holding EPH and financial group PPF have agreed to join forces in a bid to acquire Swedish Vattenfall’s assets in Germany, the pair announced in a statement on October 13.

The move sees EPH and PPF working together after a brief hiatus, as the pair seeks to raise its chances of outbidding other suitors for the lignite generation and mining assets. Vattenfall’s assets are just the latest acquisition target for EPH, which has embarked on a spending spree that saw the purchase of coal assets in the UK and Italy over the past year.

EPH is also the preferred bidder to team up with the Slovak government to buy the Italian utility out of Slovenske Elektrarne. Its acquistions drive has many questioning just how stretched the closely-held company's finances might be. However, the oligarch-owned holding appears determined to beat Czech state-controlled rival CEZ to regional assets. 

“The objective of the joint venture, in which the two groups will hold equal stakes, is to succeed in the sales process and so acquire the coal mines and power stations that the Swedish group is selling," the statement read.

Vattenfall asked potential bidders in September to express interest in its German lignite operations, which are valued by analysts at about €2bn. The Swedish utility said all of its lignite generation and mining assets in Germany will be included in the sale. 

State-owned Vattenfall is under pressure from the Swedish government, which includes the Greens, to sell its profitable lignite power business because it is heavily polluting. Bidders can also make offers for 10 hydropower plants in Germany. 

Besides EPH, CEZ has also expressed interest. The two rivals were competing earlier this year to buy Italian Enel’s 66% stake in Slovak power producer Slovenske Elektrarne (SE). CEZ, however, pulled out after Bratislava announced it wants to raise its current 34% stake to a majority. Controlled by figures from Slovak financial group J&T, EPH already operates Slovakian gas network operator Eustream as a minority partner to the government.

Buying Vattenfall’s assets would expand EPH’s presence in Germany, where it already owns brown-coal mining company Mibrag. Its acquisition drive to buy coal-based assets in the EU comes as other large European power groups retreat from conventional generation to re-focus on renewables.

Rising carbon taxes and the huge investment needed to make older generation assets comply with EU emissions standards make such assets a poor bet, according to many. EPH, on the other hand,is betting on a "capacity market" scheme that would see owners compensated for maintaining generation assets, even if they are not operated, because of energy security concerns in the EU.

The team-up brings EPH back together with PPF, the closely-held financial group owned by the Czech Republic's richest man, Petr Kellner. The billionaire sold his 49% stake in the energy holding to his partners for €1.1bn, to help fund his acquisition of the country's largest telecommunications operator O2 CR. 

Earlier this year, reports in Czech media suggested EPH and PPF were looking to club together to buy Unipetrol, the country's leading oil refiner and petrochemical company, from Polish state-owned oil group PKN Orlen.

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