UPDATE 2-Vattenfall CEO to step down in 2015, doubts cloud German grids
* CEO Loseth says won't renew contract
* Board begins search for successor
* Q3 underlying earnings fall 10.6 pct yr/yr
* Uncertainty about grid concessions in Hamburg, Berlin (Adds CEO comment, German grid process)
By Niklas Pollard and Nerijus Adomaitis
STOCKHOLM/OSLO, Oct 29 (Reuters) - State-owned Swedish utility Vattenfall, which is battling weak wholesale electricity prices and the legacy of a disastrous acquisition, said chief executive Oystein Loseth would step down when his contract expires in March 2015.
Scandinavia's biggest power generator also said lingering weakness in wholesale prices in continental Europe had weighed on earnings as it remained under pressure at home to retrench to its better-performing home market.
"I have informed the Board that I do not wish to extend my contract after 2015. This is for personal reasons. I have notified the board early in order to provide clarity and to give them sufficient time for recruitment," Loseth said.
Vattenfall, hit by unexpected events such as Germany's decision to phase out nuclear power, wrote down the value of its business by 30 billion crowns ($4.7 billion) in the second quarter alone due to weak power markets and a hangover from a decade of debt-fuelled expansion that left it one of Europe's biggest energy firms.
Loseth was head of Dutch firm Nuon when Vattenfall bought it for 8.5 billion euros ($11.7 billion) in 2009 just as power markets softened in the wake of the global financial crisis.
Much of Nuon's gas-burning capacity is now often idle due to cheaper imported German wind or solar power.
Loseth succeeded the mastermind of the purchase, former Vattenfall Chief Executive Lars Josefsson, in 2010 as political and media criticism of the deal gathered pace.
Even Vattenfall's most prized German assets - the electricity grids in Berlin and Hamburg - are under a cloud after Hamburg voters decided the city should buy back the network. Berlin is having a similar poll in November.
"It means that a city of Hamburg has a wish to take full ownership eventually and to take up a concession," Loseth told a news conference.
Vattenfall's concessions for both grids end in late 2014 and a positive vote could make it harder to extend those, with Hamburg already saying it could set up its own operator.
"We hope to become a winner (of a renewed concession). Then we don't have to do anything. But if there is another winner, it has to buy the assets from us," Loseth said, declining to give a value for the Hamburg and Berlin grids, both bought in 2001.
Vattenfall spent about 22 billion euros on acquisitions over the past 15 years, trying to match bigger rivals such as Germany's E.ON and France's EDF, but has since sold minor assets to ease its debt burden.
Vattenfall said in the second quarter it would split into two divisions - one Nordic and one for continental Europe - and consider outside investors for the European business.
"The work on splitting up Vattenfall's operations into two regions - the Nordic countries and Continental Europe/UK - is progressing according to plan," Loseth said on Tuesday.
The company, fully owned by the Swedish government, said underlying operating earnings were 4.00 billion Swedish crowns ($631.3 million) in the third quarter compared with 4.47 billion in the corresponding period of last year. ($1 = 6.3362 Swedish crowns) ($1 = 0.7254 euros) (Additional reporting by Johan Ahlander; Editing by Mark Potter and David Cowell)
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