Steag spin-off Iqony wants to almost double profits in four years

Steag coal-fired power plant in Duisburg

Thanks to the energy price crisis, the power plant operator Steag went from being a renovation case to a crisis beneficiary.

(Photo: Bloomberg/Getty Images)

Dusseldorf Since the beginning of the year, the former hard coal group Steag has been officially divided into two areas: The business with fossil energy and power plants continues under the company name Steag Power. Under the umbrella of the company Iqony, on the other hand, they are now focusing on “decentralized and decarbonized energies”.

“We are now bundling the growth business in Iqony and want to consistently expand our portfolio here,” says former Steag and new Iqony CEO Andreas Reichel in an interview with the Handelsblatt. As a result, the newly founded company hopes above all to achieve significant profit growth.

In the past financial year, the division of today’s Iqony would have already generated an operating profit of more than 240 million euros. In 2027, the renewable activities alone should then generate an operating profit of over 350 million euros. That would be growth of around 45 percent. A special focus is on the heating area.

Renewable energies as a profit maker

“We are already the third-largest district heating operator in Germany, and we are also the market leader when it comes to supplying heat from geothermal energy,” says Reichel, explaining the new strategy. The manager does not want to reveal exactly how much is to be invested for the double-digit growth rates in the next few years. “We use the additional income from coal-fired power generation to generate growth, but we are still subject to a restructuring agreement,” Reichel clarifies.

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In the first six months of the year alone, the Essen-based company achieved earnings before interest, taxes, depreciation and amortization (Ebitda) of 450 million euros for the entire group with sales of 2.4 billion euros. Thanks to the energy price crisis, the power plant operator Steag became a crisis beneficiary. Due to the possibility of leaving old power plants connected to the grid for longer, the income of the fossil Steag Power should continue to rise this year even after the division of the business areas.

The Bergkamen power plants in the Ruhr area and Völklingen-Fenne in Saarland, which were supposed to be shut down at the end of the year, will remain connected to the grid longer. The Quierschied and Bexbach plants in Saarland are also running at full capacity again. Steag could provide a total of 2.3 gigawatts of power in this way.

The plans to sell the company are gaining momentum thanks to the good figures. 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.

From restructuring case to crisis profiteer

Net debt totaled 485 million euros – also due to the energy transition and the politically enforced move away from fossil fuels, Steag’s main business. A little more than half of the profits in the first half of 2022 will come from the hard coal business. Around 45 percent comes from the second area of ​​renewables, storage and geothermal systems.

CEO Reichel continues to emphasize that the company should be sold as a whole. While many investors are interested in the “green” area, interest in the “black” core business is limited. First bids are expected for late March, early April.

According to financial circles, Steag could be valued at two to three billion euros. The current owners had hoped that the company would have been able to benefit from the sharp rise in electricity prices for longer. However, they have fallen noticeably again in the past few weeks.

More: Skimming off profits and price brakes: This is how the energy market will continue in 2023

Handelsblatt energy briefing

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