Vattenfall Returns Power Grid to Hamburg After ReferendumNicholas Brautlecht and Niklas Magnusson
Vattenfall AB agreed to sell its 74.9 percent stake in Hamburg’s power-grid operator at a capital gain of at least 300 million euros ($409 million) to the German port city after its citizens voted for a buyback.
Vattenfall and Hamburg agreed on a preliminary valuation for all of Stromnetz Hamburg GmbH of 550 million euros, Stockholm-based Vattenfall said in a statement today. A jointly appointed external auditor will determine the final value, which won’t be less than 495 million euros, the Swedish utility said. Hamburg also has an option to buy Vattenfall’s local district heating network for at least 950 million euros in 2019 under the terms of the accord.
The sale comes as state-owned Vattenfall unwinds parts of a decades-long international expansion after announcing writedowns of 29.7 billion kronor ($4.6 billion) in July, mainly related to its businesses in the Netherlands and Germany. Commercial utilities operating in Germany have seen margins squeezed by Chancellor Angela Merkel’s decision to phase out nuclear power by 2022 in a shift to renewable energy.
While Vattenfall regrets having to sell the electricity network business, the “agreement is fair for all parties and creates a foundation for continued good cooperation with the city of Hamburg,” Tuomo Hatakka, head of Vattenfall’s continental Europe and U.K. division, said in the statement.
“We definitely wouldn’t have been better off economically if we had entered a conflict with Vattenfall to get the grids back,” Hamburg’s Social Democrat Mayor Olaf Scholz said at a press briefing at Hamburg’s city hall today.
The power grid supplies 1.1 million households and businesses in Germany’s second-biggest city with 13 billion kilowatt-hours per year, according to Vattenfall. Hamburg has an option to buy Vattenfall’s majority stake in district heating company Vattenfall Waerme Hamburg GmbH, in which the city state holds 25.1 percent, by 2019.
Hamburg’s senate and Vattenfall’s supervisory board plan to give final approval to the power grid accord by Feb. 14, Scholz said. The Federal Cartel Office has already given the green light, according to the state’s asset management unit HGV.
Hamburg still needs to win a concession tender, which the state’s Environment Ministry plans to complete by this fall, so it can operate the power grid. The current operating license ends on Dec. 31 2014.
At least four companies, including EON SE’s North German unit EON Hanse and Dutch grid operator Alliander NV, notified the Environment Ministry by yesterday’s deadline of their plan to bid for the new concession.
The city is still in negotiations to repurchase the gas grid owned by EON, Rainer Klemmt-Nissen, HGV managing director said at the briefing. “As the gas grid concession runs out in 2016 at the earliest, we still have a bit more time to talk to EON,” Klemmt-Nissen said.
Scholz opposed a complete buyback, saying this would overburden the city, whose debt pile stands at more than 20 billion euros.
“It wasn’t the right decision to sell the grids in the past in the first place,” Scholz said at the briefing. “On the other hand, we need to acknowledge that we sold a company with shareholdings in nuclear power stations around Hamburg and we are now buying back not a single stake in a nuclear power plant, so it will take time to find out which side made the better deal.”
The minimum price in a potential sale of the district heating operations will be 1.15 billion euros if a gas-powered combined heat and power plant is built in Wedel, a town on Hamburg’s western outskirts, and 950 million euros if a decision on such a plant has not been taken by the end of 2015, Vattenfall said. The final value of the district heating operations will also be decided by an external party.
Vattenfall yesterday completed the divestment of its Polish assets by selling its 19 percent stake in Enea SA, Poland’s fourth-biggest power utility, for 1.03 billion zloty ($337 million), or 12.5 zloty for each share. It bought the stake for 20.14 zloty apiece in 2008. In 2011, Vattenfall sold its Polish power and heating units to Tauron Polska Energia SA and Polskie Gornictwo Naftowe i Gazownictwo SA for 7.59 billion zloty.