November 24, 2014 / 4:55 PM / 5 years ago

UPDATE 1-Vattenfall hires Citi to help sell German lignite assets - sources

* Vattenfall seeks exit due to losses, green issues

* Czech group has expressed interest, German peers declined

* Public image could deter buyers (Adds background, context, quote)

FRANKFURT, Nov 24 (Reuters) - Sweden’s Vattenfall has mandated Citi to organise the sale of its lignite power plants and mines in Germany as it retrenches from past large acquisitions that have sent it deep into the red, two people familiar with the situation said.

The group had put the assets, which could raise up to 3 billion euros ($3.7 billion), up for sale last month. They could attract interest from buyout groups and foreign power producers.

Vattenfall and Citi declined to comment.

Vattenfall, which had adjusted net debt of 151.5 billion Swedish crowns ($20 billion) at the end of September, posted a third-quarter operating loss of 19.4 billion crowns after taking a 23.1 billion impairment charge mainly related to its fossil fuel assets and trading operations.

The company wants to get rid of the four lignite mines and power plants with 9,000 megawatts of capacity, aiming among other reasons to give the group a greener profile.

EPH, the Czech Republic’s second-largest power producer after regional bigwig CEZ, has already said it is interested in the assets.

One of the sources said several Asian players might form a consortium to make a bid.

Lignite or brown coal is relatively more polluting but its use makes power generators independent of fuel import risks, highlighted by the Russia-Ukraine crisis.

Germany’s economy minister has signalled he would try and ask Vattenfall to hold on to the assets, also because steady coal-generated electricity provides a back-up for volatile wind and solar sources.

“Tens of thousands of employees are tied to the lignite industry and that also has big political implications in structurally weak eastern German regions,” a person familiar with the industry said.

Other people familiar with situation said the lignite assets may be a hard sell and might have to be taken over by state governments.

Vattenfall’s peers have said they will shun the assets.

RWE generation chief Matthias Hartung has said the group is not interested in eastern German brown coal assets, while EnBW finance chief Thomas Kusterer said his company was not interested for now as its focus was on renewables, but it would watch the process and prices closely.

E.ON has declined comment.

1 US dollar = 0.8046 euro Reporting by Arno Schuetze, Vera Eckert, Chris Steitz and Tom Kaeckenhoff; Editing by Kirsti Knolle and David Holmes

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