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„STEAG 2022“: Strategic perspectives in the energy sector

The framework conditions for producing electricity in conventional large-scale power plants have changed substantially for the long-term as a result of the revised German energy policy. Prioritising renewable energies triggers economies of scale and price effects that place the owners and operators of fossil-fuel power stations in particular under considerable pressure in terms of earnings. In response to this, the STEAG Group has chosen to take early action by optimising the cost and earnings structure. Thanks to a holistic project taking all business areas into account, STEAG is now able to adapt more comprehensively to the effects of the politically determined energy market. As part of the STEAG 2022 project, the company’s current positioning was examined and areas for future orientation identified. The objective of STEAG 2022 is to safeguard the economic performance and development of medium-term growth prospects.

The STEAG 2022 project comprises six core elements, each of which reinforce and distinguish the company’s future role:

  • Operator and optimiser of group-owned power stations in a dynamic market environment;
  • diverse stakeholder in the energy trading markets relevant to STEAG;
  • competitor in the international market for energy services and power station operations;
  • provider of safe decommissioning of nuclear facilities;
  • growing developer and operator in the field of decentralised energy supply; and
  • driven competitor in new projects, acquisitions and regional project development in attractive growth markets.

STEAG 2022 is the Essen-based energy company’s response to the rapid, lasting changes in the market climate, both in Germany and around the world. In the past few years, STEAG was able to confront this foreseeable development successfully using active optimisation and flexibilisation measures. However, the financial figures are now increasingly coming under pressure. “STEAG is therefore improving earnings, reducing costs and creating scope for investments by increasing the number of growth projects and measures in its portfolio and its overall efficiency. In future, services will contribute further towards continued development. International operations remain extremely important because they offer better opportunities than the declining business in Germany,” says Joachim Rumstadt, Chairman of the Executive Board at STEAG GmbH.

With the implementation of STEAG 2022, the company is able to position itself as an innovative and agile provider for the operation of power generation plants, energy services and domestic and international trade that is open to different technologies.

Operating power stations
STEAG has decades of experience in operating group-owned power stations. Over the past few years, the company has established its competitive advantages by combining expertise and technical skills, such as measures for lowering the minimum load, with flexibilisation of fuel use and the interaction of business operations. These competitive advantages have made it possible for the STEAG Group to keep its power stations in the market. In spite of these ongoing optimisations and stable utilisation of capacity, the deteriorating market situation is now leading to significant shortfalls in revenue. Some consideration is therefore being given to the idea of withdrawing those power stations that no longer generate a positive income from the market, either on a temporary or permanent basis. This would result in the STEAG Group having to cut hundreds of jobs. The possibility of selling off assets that have now reached peak added value, such as district heating in Germany and wind farms around the world, in a timely manner is also being explored – i.e. exploiting the development of a sellers’ market to generate liquidity.

Marketing energy
Once its long-term electricity supply and reserve capacity contracts with RWE expired, STEAG swiftly adapted to the asset-based marketing of group-owned power station output and set up its own sales and distribution organisation. This business model, in which individual market assessments are made and market developments are anticipated early in compliance with a specified conceptual risk framework and taken into account for the implemented strategies and products, has been continuously further developed to great success. However, the decline in output from domestic power stations will have to lead to a reorientation in the trade sector. As part of STEAG 2022, a targeted and successive expansion of marketing foreign production capacities is in place.

Providing energy
Services, investments and acquisitions are at the centre of the focus on growth – in a wide variety of markets and in many cases also in cooperation with partners. Owing to the particular expertise of STEAG, services are an exceptionally attractive growth area. STEAG has pronounced expertise in many fields of the power industry that will not only benefit group-owned power stations in future, but will also be offered increasingly to third-party companies and power station owners in the national and international markets. This includes planning and construction, operation, maintenance and marketing of power stations and their by-products.

Decommissioning nuclear facilities
There are new, promising projects to be found in decommissioning nuclear technology, i. e.. This market is experiencing extremely strong growth both in and outside of Germany and therefore offers great market potential. STEAG is already in demand as a service partner for the safe decommissioning of nuclear facilities – a position which should be developed further in terms of group expertise and by collaborating with specialist partners.

Developing and operating a decentralised energy supply
Over the past year, STEAG has achieved well-documented market successes in the decentralised energy segment with the Ford Saarlouis and TU Darmstadt projects. The company plans to use projects of this kind as part of STEAG 2022 to further expand its positioning for decentralised contracting projects. This primarily involves opening up additional market potential in smaller plants, as well as new customer groups.

Acquiring new projects
In the past two years, STEAG has invested approximately 600 m e and thereby expanded the production portfolio by some 450 MW – particularly in the field of renewable energies. Clear emphasis was placed on wind farms, which received roughly 500 m e of investment. Business operations in the onshore wind sector are due to be expanded further as part of STEAG 2022. Expansion in Germany and France will focus increasingly on involvement in earlier project phases and possibly the value-enhancing sale of projects to third parties. District heating projects in Poland are also attractive opportunities for growth. STEAG will be active in the market and open to different technologies for any new projects. Owing to its existing expertise, the key focus for these projects will be on coal, wind power, geothermal and waste-to-energy plants. Projects for the balancing market – such as the six innovative large-scale battery systems that STEAG installed at sites in the Ruhr and the Saarland – should also be explored. In addition to this, acquisitions are gaining considerable weight when it comes to achieving short-term earnings and liquidity contributions.

All these elements should help transform the Group extensively in order to guarantee STEAG’s economic performance and develop a sustainable structure that preserves value for the Group as a whole. (STEAG/Si.)