Capacity swaps see EOn enter Belgian market
18 December 2008
German power giant EOn is set to become Belgium's third biggest power producer under an agreement to swap capacity, including rights to nuclear output, with Electrabel.
The two companies have signed a memorandum of understanding (MoU) under which EOn will sell a total of around 1700 MWe of generating capacity and procurement rights in Germany to Electrabel, in return for a similar amount of capacity and rights in Belgium. The deal includes the exchange of 770 MWe of power procurement rights from three of Belgium's nuclear power reactors – Doel 1, Doel 2 and Tihange – for 700 MWe of procurement rights from the Krummel, Gundremmingen and Unterweser nuclear power plants.
All the reactors exist under the threat of early closure for political reasons. Belgian reactors are limited to lifespans of 40 years with Doel 1 and 2 licensed until 2014 and 2015 respectively. The three reactors at Tihange can operate until 2015, 2022 and 2025. In Germany, reactors are limited to an average life of just 32 years, with some scope for transfer between units. Unterweser is to shut in 2012 while Krummel and the two reactors an Gundremmingen are to follow in 2016.
The involvement of nuclear units in the international capacity swap has caused speculation that the new arrangement could make further political pressure to shut the reactors early more difficult. Similar units in other countries have been authorised to operate for up to 60 years, subject to certain checks, maintenance and reports.
The companies' move comes in the wake of the 26 November EU Commission approval of EOn proposals to increase competition by selling around 5000 MWe of its German power station capacity and its ultrahigh-voltage transmission network. EOn had proposed the sale following EU Commission antitrust investigations into concerns that the company was contravening EU laws by abusing a dominant market position. The EU investigations have been dropped now that EOn's divestiture plans have been made legally binding.
As well as the nuclear capacity, the deal will see EOn buy the 556 MWe Langerlo coal-fired power station and the 385 MWe Vilvoorde gas-fired plant from Electrabel, with the Belgian company acquiring a similar total capacity mostly through stakes in German coal-fired power stations but also in gas, biomass and hydro capacity. EOn has also signed a MoU with EnBW on the sale of its stakes in two other German coal-fired plants. The transactions are expected to be completed in the first half of 2009, subject to approval by antitrust authorities and the relevant internal bodies.
EOn CEO Wulf Bernotat said the latest agreement would also mark EOn's entry into the Belgian power generation market. "This one transaction would give us more than 12% of the Belgian market, making us the country's third biggest power producer," he said. The company had already embarked on implementing its commitment with an asset swap with Swedish power company Statkraft, finalised in July.