Reuters logo
4 years ago
Berlin referendum on power grid could hurt Vattenfall
October 30, 2013 / 5:07 PM / 4 years ago

Berlin referendum on power grid could hurt Vattenfall

BERLIN, Oct 30 (Reuters) - Berliners vote this week on returning the electricity grid of Germany's capital and biggest city to public hands, a move that could be bad news for the licence owner, Swedish utility Vattenfall, in its biggest market.

A "yes" vote on Sunday would deprive Vattenfall of a steady revenue stream and disappoint any hopes the company might have of getting a high price for the grid by selling it to investors.

The referendum is the latest initiative from German citizens keen to take more control of their power supplies after the people of Hamburg, Germany's second biggest city and main port, voted for a return of Vattenfall's grid into public ownership last September.

The "Berliner Energietisch" initiative, which wants to take over the grid in Jan. 2015, has forced the referendum by launching a huge campaign and collecting signatures from more than 7 percent of eligible voters in the German capital.

"We want to found a utility that produces renewable energy in Berlin. Secondly, we want the power grid, which now belongs to Vattenfall, to be brought back under public control," Energietisch says on its website.

"We want to get it back because the profits from the grid, which were 150 million euros ($207 million) last year alone, now go to the pockets of a Swedish nuclear and coal firm," it said.

Swedish state-owned Vattenfall relies heavily on nuclear and coal-fired power generation.

A Berlintrend poll in September showed 60 percent of the capital's residents backed Energietisch. To succeed, it needs majority support in the referendum and the backing of at least 25 percent of the city's eligible voters.

Trouble for Vattenfall

Vattenfall has had to idle two nuclear plants following Germany's policy decision in 2011 to exit nuclear power, and it is already struggling with high debt and decreasing profits as low power prices clash with high fuel costs.

In the second quarter alone, it wrote down the value of its business by 30 billion Swedish krona ($4.7 billion).

Vattenfall spent about 22 billion euros on acquisitions over the past 15 years, trying to match rivals like Germany's E.ON , but has since sold assets to ease its debt burden.

The company has also said that it would split into two divisions, one Nordic and another for continental Europe, and that it would consider investors for the European business.

Berlin's power grid, which supplies 3.4 million people, is one of the firm's most prized assets, and a forced sale to the public sector would probably come at a lower price than laying it off to private bidders.

Vattenfall's licence to run it expires next year and Chief Executive Oystein Loseth told analysts this week he hoped to get an extension but acknowledged the firm may have to sell up.

If Energietisch, supported by the Green party, succeeds, it would raise the pressure on Berlin to buy back the licence.

The left-right coalition that runs Berlin, struggling with a 60 billion euro debt, opposes the move mainly because of the high cost of a buy-back. It has already bought back a stake in water utility Berliner Wasserbetriebe from utility RWE .

Economists have also warned about the cost.

"This is a lot of money. Money that Berlin does not have lying around," Jan Eder, head of Berlin's IHK institute, said.

"You can get good returns with a grid, but not if you have to finance the whole thing via debt and are bound by interest and redemption payments," he told German radio.

Vattenfall has declined to put a value on the Hamburg and Berlin grids.

Some bankers estimate the company could net around 2 billion euros each if sold them to infrastructure investors. Energietisch, however, says it reckons on a price of about 400 million euros. ($1 = 0.7262 euros) (Additional reporting by Vera Eckert; Editing by Henning Gloystein and Anthony Barker)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below