Vattenfall in German district heating dispute

Date: 22 February 2018

Negotiations for the sale of the German city of Hamburg’s district heating system have reportedly fallen through, with arbitration necessary.

Sweden’s Vattenfall is the majority owner of Hamburg’s district heating business, but in a 2013 referendum the city’s voters decided to remunicipalize their power, gas and heating supplies.

Hamburg and Vattenfall then inked a contract which would allow the city to buy the company’s 74.9 per cent share in the heating system by 2019, at a price of at least €950m ($1.2bn).

Vattenfall’s share had previously been estimated at €1.3bn and the firm is sticking to the higher price tag despite the suspension of a new gas-fired combined heat and power (CHP) project in the nearby town of Wedel, which had been included in the initial valuation.

Jan Dube, head of communications at Germany’s energy ministry, was quoted by the Reuters news service as saying that Hamburg “rejects the price proposed by Vattenfall” and that Vattenfall’s inflexibility on price is “a signal that there is no recognizable interest on the company’s part to amicably complete the agreed buyback”.

Meanwhile, Vattenfall said it had begun the process of having the district heating business re-valued, but if the results are higher than the €950m minimum specified in the contract, it plans to charge the higher price.

According to Reuters, an independent accountant will now be called in to act as an arbitrator in the process and to re-value the company by mid-April.

In 2016 Vattenfall announced plans to invest €83.5m in refurbishing the 260 MWe/433 MWth hard coal-fired CHP plant in Wedel in order to “secure [Hamburg’s] district heating supply for the next couple of years” in the face of more stringent environmental standards.

At the time, the company said it was also “developing a concept to achieve climate neutrality in Hamburg heat operations by 2050” which could potentially include “heat storage, power-to-heat, industrial heat, decentral solutions and possibly gas-CHP that will replace the existing plant”.

But in April 2017, environmental consultancy the Hamburg Institut and Hamburg Wasser subsidiary Consulaqua proposed an alternative: an underground facility designed to store excess heat from industry and power generation, supplying around a quarter of the city’s heat demand and making Vattenfall’s scheme unnecessary.

The city’s district heating network currently supplies around 19 per cent of households.

Source: Decentralised Energy