The coal group has divided its business into fossil and green plants.
(Photo: Bloomberg/Getty Images)
Dusseldorf, Frankfurt After a jump in profits at Steag, the owners of Germany’s fifth-largest electricity producer are hoping for a high selling price at the auction that is officially starting these days. Thanks to record prices for electricity and gas in the crisis year 2022, the Essen financial circles could at least achieve an operating result of more than one billion. In addition, Steag’s debt has fallen “significantly”.
With figures like these behind them, the owner municipalities of Dortmund, Essen, Bochum, Duisburg, Oberhausen and Dinslaken expect to be able to sell the company without a loss. A year ago nobody would have expected that.
After ever-increasing losses, the hard coal group agreed on a restructuring plan with its owners, the municipalities of the Ruhr area, at the end of 2021. Part of the agreement is a sale of the company by the end of the year.
The acquisition of the company from the chemical company Evonik cost a good 1.2 billion euros in 2010. Twelve years later, a total of 1.8 billion euros in debt and pension obligations weighed on Steag.
During the ongoing energy price crisis, however, the power plant operator Steag became a beneficiary of the crisis. Several power plants that should have been shut down at the end of October 2022 are now staying on the grid longer. Instead of an output of 700 megawatts, Steag currently has a total output of 3.7 gigawatts – at least until the end of the exemption regulation under the Replacement Power Plants Act in March 2024.
Plans to sell gain momentum
“However, we assume that the Saarland power plants Weiher 3 and Bexbach will continue to be systemically relevant at least until the end of March 2025 and the plant in Völklingen-Fenne and in Bergkamen in North Rhine-Westphalia until the end of October 2024 and will therefore remain in the grid reserve,” explained a Steag spokesman.
The plans for the sale of the company gain momentum due to the unexpected additional proceeds. The two-stage bidding process is expected to continue into the summer. The signing of a sales contract is planned for July. In any case, there is no lack of interest, according to company circles on Thursday.
In the meantime, however, the owners had had a serious argument about the right course, with the 36 percent owner Dortmund standing against the other five municipalities. In the meantime, however, the relationship is considered to be largely repaired – out of necessity. The achievable proceeds also depend on the consensus of the municipalities, said a company insider.
In preparation for the sale, the owners of the KSBG holding decided in October to split Steag into a “green” and a “black” division – after intensive discussions between the municipalities and with employee representatives who fear job losses.
Although many investors are interested in Steag’s activities in renewable energies, the “green” sector, they are not interested in the traditional core business, “black” coal-fired power generation.
Legal separation of the two areas
The cities finally agreed to bring Steag onto the market as a whole, but to legally separate the two areas so that buyers can continue to run them as individual companies. This is important not least because many investors have strict sustainability guidelines that make investments in fossil fuels more difficult. In addition, although bank financing for wind power and solar systems can be easily obtained, this is not the case for coal-fired power plants, which are currently profitable but unattractive in the long term.
According to financial circles, some investors want to rely on trustee structures. So-called “Shareholder as a Service” companies would continue the “black” area for a fee and wind it up after the final end of the term. However, the profits would remain with Steag until the sale (closing) of Steag.
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For investors, the “green” area is of particular interest. In the first half of 2022, around 45 percent of profits came from the business with renewables, storage and geothermal systems. According to financial circles, a share of 20 to 30 percent is expected for the year as a whole, given the additional revenue from coal-fired power plants.
Steag has already held initial exploratory talks with the Czech investor EPH, which bought Vattenfall’s lignite business in eastern Germany in 2016, and with the Czech supplier CEZ, which continues to rely heavily on coal.
However, around two dozen private equity and infrastructure investors were also approached, including Macquarie, Brookfield, IFM, CVC, KKR and EQT. For some of them, commitments to coal are on the index from an ecological point of view. But they could buy everything, keep the “green” part and either continue to operate the “black” part for a few years or sell it, that’s the hope of some Steag owners.
According to company circles, the chances of a complete sale of the two legally separate Steag parts are now considered “very high”.
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