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Vattenfall to press ahead with German lignite sale

World Coal,

Sweden's state-owned utility Vattenfall plans to press ahead with the sale of its lignite power plants in Germany despite a new company structure announced by its CEO on Thursday.

Vattenfall announced in October that it aimed to sell its brown-coal generation plants and mines in eastern Germany. The industry says the assets could fetch between €2 – 3 billion (US$2.5 – 3.7 billion).

The Nordic region's biggest utility said it would be run as six business areas to support its strategy from April 1. That is a change from its organisation into two regional areas, Nordic and UK/Continental Europe, which has been in place only since the start of 2014.

"Lignite power is left outside of this reorganisation. We are still planning to sell the lignite power plants in Germany," a company spokesman said. It is expected to retain heat production, wind power and trading business in Germany.

The new organisation is part of efforts by new CEO Magnus Hall to put his stamp on the company after he took up the role in October.

"We must defend our position as a European company," Hall said.

"We will be an electricity producer that concentrates on emission-free or emission-efficient solutions," he added.

Analysts said the previous model of two regional structures had signalled Vattenfall's plans for a sale of large parts of its business after a decade of debt-fuelled expansion.

"It could be interpreted as a step back from the previous plans to sell the whole business in Germany, but there is no big drama in this, as they will continue with the sale of lignite operations," said Ingvar Matsson, an analyst at Swedbank Markets.

Like some other European utilities, Vattenfall was hit by demand or renewables squeezing out its gas and coal power plants, low wholesale prices and Germany's decision to phase out nuclear power.

Vattenfall took an impairment charge of 23.1 billion Swedish crowns (US$2.9 billion) in 3Q14, mainly related to its fossil fuel assets in the continental Europe, resulting in an operating loss of 19.4 billion crowns.

According to Reuters, the acquisition spree over the past decade left the company with adjusted net debt of 151.5 billion crowns at the end of September.

Edited from various sources by Sam Dodson

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