The buyers of a Swedish power firm’s lignite mines in Germany have taken the next step in their purchase, despite state aid issues hanging over the sale.
Czech utility EPH and financial investor PPF are buying the concerns from Vattenfall and have now requested merger approval from the European Commission. The Commission will decide by September 22 whether to allow the billion-Euro purchase right away, ask the parties for commitments, or investigate it further.
EPH and PPF intend to take over Vattenfall subsidiaries in eastern Germany. These subsidiaries hold lignite-fired power plants with 8.1 GW capacity and five opencast mines with more than 900m tonnes of lignite reserves.
The deal was signed between Vattenfall, a utility which is wholly-owned by the Swedish state, and the buyers in April and received approval by the Swedish government in July.
After news surfaced that a competitor to the buyers had complained about the sale process to the European Commission, Vattenfall spokespeople confirmed in August that the closing of the sale would be delayed until after the originally announced date.
Triple bill for taxpayers?
ClientEarth lawyer Ken Huestebeck said: “Separate from the merger approval process, this deal is subject to close scrutiny by the European Commission over state aid. In our opinion, EU state aid rules were not followed carefully enough in this privatisation. If this turns out to be true, it would be unlawful to close the deal.
“The Swedish government must commit to follow the law and stop the deal going forward as agreed until the European Commission has concluded its state aid assessment.
“Otherwise, Swedish taxpayers risk paying a triple bill: first, by providing the buyers EPH and PPF with billions of Euros to agree to the sale; second, by having to pay fines levied on Sweden after Sweden fails to get back state aid from the buyers if the deal turns out to be against European law; and third, when global climate change materially affects Sweden and rest of the world.
“If the Swedish government does not hit pause on the deal, the European Commission should issue an injunction to force it to do so. In the past the Commission has ordered governments to stop a privatisation from going forward until it has granted state aid approval.
“It should do so in this case too. The merger approval would remove the last effective barrier to closing the deal. After that, the deal would indeed be difficult to reverse. Furthermore, with EPH and PPF not being Swedish companies, any unlawful state aid would be hard to get back.
Lack of transparency
“There has been a deplorable lack of transparency around the complex sale. So far, Vattenfall has not even disclosed the actual sale price. The Swedish government has declared all documents confidential. It is unacceptable from a public accountability perspective that this includes even the titles of specific documents in the file.
“Even if this deal is closed ignoring the state aid issue, this might not be the last legal troubles for it. German law explicitly gives state authorities the power to make the renewal of the permit for each mining site conditional upon EPH and PPF providing securities to cover the costs of the eventual clean up.
“For this power to be used, it is enough that there are doubts based on, for example, general experience or the overall economic situation of the buyers. EPH’s corporate structure and contrarian business model clearly give rise to such concerns.”