* To hold on to brown coal mine, must fuel new plant
* Says must cut costs in all parts of business
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FRANKFURT Oct 8 German utility RWE
has denied a report it is considering the early closure of its
Garzweiler brown coal mine, though it reaffirmed it is pressing
ahead with restructuring measures due to the unprofitable
wholesale market for power.
The Sueddeutsche Zeitung newspaper said on Tuesday, without
citing sources, that RWE's operations at Garzweiler would stop
when all the lignite, or brown coal, had been mined from areas
already cleared of towns and villages.
That signalled a potential closure in 2017-2018, compared
with the official plan to keep the mine running until 2045.
"RWE affirms it holds on to its current plans to continue
the Garzweiler II operations," chief executive Peter Terium in a
statement, adding flexible brown coal generation plants were
needed to complement volatile renewable energy.
RWE and peers E.ON and Vattenfall are
searching for ways to cut costs in response to depressed power
generation prices, in part due to the sluggish European economy
and also to Germany's drive to expand renewable energy.
RWE operates thousands of megawatts of brown-coal-to-power
capacity in its core North-Rhine Westphalia region and needs
local supplies to fuel them.
Matthias Hartung, CEO of the RWE Generation subsidiary, said
there were 1 billion tonnes of brown coal left in the Garzweiler
mine, which produces between 35 and 40 million tonnes annually.
"Garzweiler supplies the new brown coal fired power station
at Neurath with coal, which is why it makes no sense to shut the
mine," said Roland Vetter, head of research at CF Partners, an
advisory, trading and investments firm.
However, RWE reaffirmed it was "looking to face its
operational challenges with a tough cost cutting programme in
all parts of the business."
The group in August listed old brown coal generation
capacity under review for potential closure, including the
Frimmersdorf P and Q blocks with 287 MW and 285 MW capacity
respectively, and Goldbergwerk J of 70 MW.
German forward power prices, at 38.10 euros a megawatt hour
for year ahead delivery, have fallen a third in value
over the past two years and are trading at levels last seen
eight years ago.
"Old power stations are not efficient, the fuels cost too
much and on top of this have to cut the hours they run when
there is too much renewable supply in the market," Vetter said.
Fixed costs were often not being covered when personnel and
maintenance were factored in, he added.
RWE in August 2012 opened 1,100 MW Neurath and still has new
hard coal capacity under construction at Hamm.
Coal generation is saddled with uncertainty over long-term
emissions rights prices, environmental protests, and comes with
costly obligations to recultivate regions after mine closures.
Separately, RWE is planning to bundle its retail sales
businesses, a source familiar with the situation said.
This followed a report in business daily Handelsblatt saying
it would seek to build a western European holding for
distribution activities in Germany, the Netherlands, Belgium and
RWE stock traded at 26.58 euros, down 1.3 percent at 0925
GMT, underperforming a 0.2 percent fall on the benchmark DAX.
(Reporting by Vera Eckert, additional reporting by Henning
Gloystein and Tom Kaeckenhoff; Editing by Maria Sheahan and Mark