By Neanda Salvaterra
Not everyone in Europe has doubts about the future of coal.
While European utilities have been selling off their coal-fired
power plants at a brisk pace, spurred by falling electricity prices
and new rules against carbon-dioxide emissions, a least one buyer
has been standing by to snap them up.
Since 2013, a little-known Czech company has purchased at least
10 coal- or lignite-fired power plants and related mines at
fire-sale prices, in deals worth a total of more than $7 billion,
according to data provider Dealogic. That gives it almost as much
coal-derived electricity-generating capacity as Canada.
Energetický a Pr myslový Holdings' latest acquisition is a plant
in Poland, which Electricité de France says it is selling to the
company for an undisclosed sum.
As other businesses heave coal aside, EPH is one of a small
group of companies seeking to wring profits from the fossil fuel.
The group also includes General Electric Co., which nearly doubled
its fleet of turbines for coal plants when it bought the power
business of France's Alstom SA, and which plans to build coal
plants in developing Asian economies such as India, where demand
for cheap energy is high. Electricity of Vietnam Group, a utility
firm, is heavily invested in building coal-fired power plants in
Vietnam, where the government has projected coal-derived energy
will rise to 49% by 2020, up from 25% in 2014.
In the U.S., Donald Trump's election as president has heartened
the coal sector because of his promises to reinvigorate the
industry. Delivering on the pledge could prove difficult, however,
because of the cheapness of cleaner-burning natural gas, coal's
primary competitor, and the fact that U.S. power companies have
retired hundreds of coal-burning power plants.
Analysts say EPH is unusual in its aggressive acquisition of
coal-fired generation assets in Europe, where government subsidies
have fueled a surge in renewable-energy output. The resulting glut
has depressed wholesale electricity prices, forcing conventional
power companies to dial down, switch off or close shop.
Chief Executive Tomáš David said EPH aims to serve as a stopgap
for Europe as it makes the transition to a power grid fueled by
renewable energy sources such as wind and solar power. Electricity
from those sources is often interrupted by clouds blocking the sun
or a lull in wind.
Analysts say coal-fired plants are needed to ensure a stable
power supply until renewable energy builds more market share or
battery technology allows utilities to store vast amounts of energy
until it is needed.
Moreover, Europe has few natural-gas sources, unlike in the
U.S., where domestic supplies are abundant and readily available.
Russia supplies about a third of Europe's gas needs but the
relationship is contentious as Moscow has sometimes flexed its
muscle by cutting off supplies.
"You need to have cheap, stable power plants stabilizing the
system, and this is what we are operating," Mr. David said.
EPH also has a sizable portfolio of nuclear, hydropower and
natural-gas plants and pipelines.
Many European utilities sold EPH coal assets, including
lignite-burning plants, at cut-rate prices. Such plants, which burn
a low-grade type of coal, are among the most polluting.
In September, Swedish utility giant Vattenfall sold German
lignite assets to EPH valued at an estimated $3.8 billion,
according to Dealogic, one of the Czech company's biggest deals.
Germany's focus on building renewable power capacity has left it
reliant on more polluting fuels such as lignite on days when wind
and solar don't produce enough.
EPH also bought British coal plants from both German utility RWE
AG and France's EDF, for undisclosed sums. In addition, the company
signed deals to buy coal-generation assets in Italy for about $592
million from Germany's E.On and in Slovakia from Enel Produzione
SpA in a deal valued at $514 million.
Bruno Brunetti, the managing director for global power at
consulting firm PIRA Energy Group, said weak power prices make
these investments questionable. "There are still doubts if the
conventional generators will stay online," he said. "Generally the
market is oversupplied."
EPH was formed in 2009 as a spinoff from Czech investment firm
J&T group. It has grown to encompass more than 50 companies in
seven European markets from Poland to the U.K.
Roland Vetter, the head of research at utility consulting firm
PraXis Partners, says EPH is betting partly on European countries
that have "capacity markets," in which companies are paid to be on
standby and provide reserve energy when needed. In the European
Union, 11 countries, including France, the U.K. and Italy, are at
some stage of implementing backup power systems, according to the
European Commission, the bloc's executive arm.
EPH is "hoping for a recovery in commodity prices and higher
capacity payments in the future," said Mr. Vetter.
Mr. David said his company doesn't need such subsidies. The
company said it can earn a profit by expanding in Eastern Europe,
where energy demand is expected to increase. It intends to operate
its plants until regulators tighten carbon-emissions regulations,
and then convert some of its plants to burn alternative fuels.
"We have been investing in those most modern most efficient
units that will probably stay economically in the system longer,"
Mr. David said.
Write to Neanda Salvaterra at neanda.salvaterra@wsj.com
(END) Dow Jones Newswires
November 25, 2016 05:44 ET (10:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.