Oil Report

UPDATE 1-Vattenfall eyes deal on German lignite assets sale

(Adds quotes, details about bidders, background)

OSLO, Dec 18 (Reuters) - Swedish state utility Vattenfall expects to reach a deal on selling its lignite power plants and mines in eastern Germany during the first half of 2016, its chief executive told Reuters on Friday.

Vattenfall generates about 60 terawatt-hours (TWh) from lignite annually, or about 10 percent of Germany’s total power production, but it is also the main source of the company’s carbon emissions.

“There is a clear market interest ... We expect to have something to put on the table during the first half of the next year,” Chief Executive Magnus Hall said in an interview.

Vattenfall asked potential bidders to express interest in September, and Reuters industry sources said next Monday was the deadline to submit indicative bids.

Two Czech energy groups, EPH and CEZ, have publicly stated their interest in bidding for Vattenfall assets.

Sources familiar with the situation also said Australian investment group Macquarie and German power utility Steag had teamed up to present a joint offer.

The deal was previously expected to fetch as much as 3.5 billion euros, but now Reuters sources said 3 billion was “way too high” and the enterprise value for Vattenfall’s lignite assets may be around 2.5 billion euros.

Hall declined to comment on the bidders and said there was no deadline for final bids.

Vattenfall has put its German lignite assets for sale following large writedowns and a radical shift in the country’s energy policy, with renewables pushing many conventional power plants out of the market.

Germany’s announcement in July to abandon plans for a levy on coal-fired power plants has breathed new life into the deal.

The sale includes roughly 8,100 megawatt (MW) of lignite-fired plants as well as corresponding mining activities in eastern Germany.

To sweeten the deal, Vattenfall also included about 3,000 MW worth of hydropower plants in eastern Germany.

The utility has hired Citigroup and ING as financial advisors in the transaction, with Citi being lead advisor.

Separately, Vattenfall said on Friday it has sold its 49 percent stake in Britain’s Ormonde offshore wind farm to a Swedish pension fund to raise money for new investments in renewable power. (Reporting by Nerijus Adomaitis in Oslo, Arno Schuetze in Frankfurt and Jan Lopatka in Prague; Editing by Susan Fenton)