STEAG

A lunar landscape of boulders and craters as far as the eye can see – project partners Mingas-Power, ENNI Energie & Umwelt Niederrhein (ENNI) and RAG Montan Immobilien (RMI) have officially brought the Kohlenhuck wind farm on the plateau of the Kohlenhuck mine heap in the north of Moers/Germany online. Mingas-Power, a joint venture between STEAG New Energies and RWE Power, holds a 33 % stake in these four wind turbines, each up to 190 m in height. The wind farm has an overall output of 12 MW. Around 32 m KWh of green electricity are to be generated here each year in future, corresponding to the power consumed by 9,000 households in the region. This is the third wind farm that Mingas-Power has built on a former mine dump: Kohlenhuck in Moers now joins Oberscholven in Gelsenkirchen-Buer and Lohberg in Dinslaken.

The three directors of the company founded for this specific purpose, ENNI RMI Windpark Kohlenhuck GmbH – Uwe Bruckschen (ENNI), Ulrich Porath (RMI) and Gerd Wagner (Mingas-Power) – hit the symbolic red button to put the wind turbines into operation on 8th September 2017 together with the Mayor of Moers. These three partners have invested around 20 m € in these turbines located on and in front of the former Friedrich-Heinrich mine‘s spoil tip. (STEAG/Si.)

2016, the STEAG Group, Essen/Germany, generated sales of 3.9 bn €, an 8 % increase, thanks to the expansion of its energy trading activities. At 123 m €, the operating income (EBIT) is almost 50 % less than the previous year. EBITDA of 281 m € were 118 m € less than in 2015. The Group had anticipated these drops in sales and made an announcement to that effect at an early stage. They have been attributed to changes in the German market brought about by government policy, namely the energy transition, which caused a dramatic fall in electricity prices over the last year. This led to declining or negative margins in conventional power stations throughout the industry.

“In 2016, we consistently adapted to the steadily deteriorating market conditions, especially in Germany,” said Chairman of the STEAG Management Board, Joachim Rumstadt, at the presentation of the 2016 consolidated financial statement. “As part of our STEAG 2022 future programme, we have boosted our efficiency and savings potential considerably, we are currently repositioning our portfolio and have already successfully established new opportunities for growth.”

STEAG has had many years of success in keeping its fleet of power stations well-positioned in the market by optimising the costs and earnings structure at an early stage. However, the persistent fall in electricity wholesale prices forced the Group to make a tough decision. To increase economic efficiency and prevent losses, in November 2016 STEAG decided to disconnect multiple power station units from the grid over the course of 2017, which amounts to about 40 % of its power station output in Germany (in total, approximately 8,000 MW). Between 800 and 1,000 STEAG Group jobs in Germany were affected by the decommissioning and other changes to the Group as a result of STEAG 2022. To account for this, around 150 m € of balance sheet provisions were made for staff and decommissioning power stations in the 2016 consolidated financial statement. Two of the power station units registered for (provisional) decommissioning have since been classed as systemically important by the transmission system operator.

The Group’s operating income – with EBIT to the sum of 123 m € – was primarily generated abroad and by subsidiaries. STEAG Energy Services GmbH was commissioned with managing operations for a further 2,500 MW of power station output in 2016. The subsidiary STEAG New Energies GmbH was able to complete construction of and commission three large decentralised plants, a combined heat and power station and two power stations, for Ford and Karlsberg-Brauerei as well as the Technical University of Darmstadt. In France, STEAG New Energies GmbH connected two of its own new wind farms to the grid and acquired three more plants in Germany. Thanks to the acquisition of two waste-to-energy plants with an incineration capacity of 475,000 t/a and the foundation of a new subsidiary, STEAG Waste to Energy GmbH, the strategic new entry into the globally expanding waste-to-energy market is complete. In 2016, STEAG Power Minerals GmbH was able to negotiate a long-term cooperation agreement with a company from Qatar, the Hawar Group, in order to strengthen trade and sales of power station by-products, such as fly ash and gypsum, in the Middle East and India. In South East Asia, STEAG and the Australian financial services provider, Macquarie Corporate Holdings, have founded a joint ASEAN platform, which is designed to take on the role of a development company and accelerate the financing, construction and operation of gas, coal, wind, solar and hydropower plants in the region.

However, over the next three years – while the Group is being restructured – the outlook remains subdued; not until 2020 does STEAG anticipate a noticeable increase in earnings.

For 2016, STEAG will pay a dividend (profit transfer incl. taxes) of 55 m € to its stakeholder, KSBG Kommunale Beteiligungsgesellschaft GmbH & Co. KG, (2015: 80 m €), so that the municipal shareholders can also afford to pay debt obligations (interest and repayments) accrued through the purchase of STEAG in full this year.

To make a success of the energy transition, in 2016 the STEAG Group commissioned six storage batteries, which, with a total primary operating reserve of 90 MW, have made a significant contribution to equalising fluctuations in the German grid produced by the inconsistent production of electricity from renewable energies, since autumn last year. STEAG is pioneering this technology and plans to use it in other countries.

The STEAG Group is purposefully pursuing its strategic positioning as a technologically minded producer and provider of electricity and heating. With a rated capacity of 10,130 MW in 2016 – 8,000 of which is produced in Germany – STEAG is one of the largest electricity producers in Germany, where it operates power stations at eight different STEAG locations. In the course of decommissioning five power station units in Voerde and Herne, 2,500 MW of capacity were disconnected from the grid in Germany in 2017. STEAG owns and operates three overseas coal power stations in Colombia, the Philippines and Turkey. In addition, as a service provider, STEAG Energy Services GmbH is responsible for the operation of more than 6500 MW of capacity in India, Brazil, Botswana, Spain, Georgia and Saudi Arabia among others. In 2016, STEAG had a total of 6,104 employees, 43 % of which were outside of Germany.

Thanks to expansion in recent years, the STEAG Group has a total rated capacity of 800 MW of renewable energies and decentralised generation. STEAG operates a total of 200 decentralised plants, such as wind farms, combined heat and power stations, and biomass and biogas plants, in Germany, Romania, Turkey and Poland, partly as an investor and partly as a service provider.

The “Fernwärmeschiene Rhein-Ruhr” joint venture, in cooperation with Fernwärmeversorgung Niederrhein GmbH and Energieversorgung Oberhausen AG, reached a significant milestone in 2016 with the submission of all documents for the official planning procedure. The objective of the venture is to secure a long-term, ecological heat supply for an entire region.

In 2016, STEAG invested 223 m € – roughly the same as the previous year (219 m €). The majority of investment in material assets was spent on the six large battery systems. Together with a partner, STEAG invested in the preparation of initial exploratory drilling for a geothermal power station in Indonesia, as well as wind farms in France, and exploited the boom in the heating market by taking shares in a district heating company in Poland. (STEAG/Si.)

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.)

On 1st February 2016, STEAG Energy Services do Brasil Ltd. (SESBR) took over responsibility for managing the operation of a gas treatment plant owned by Parnaiba Gas Natural S.A. (PGN). The Brazilian STEAG subsidiary was awarded this contract at the end of last year. Ulrich Sigel, Member of the Board of STEAG Energies Services GmbH, explained that his company’s operations and maintenance concept, based on their internationally recognised expertise in managing operations at thermal power plants, had convinced the customer that they were the right people for the job. For STEAG Energies Services GmbH, this also means venturing into a new field of business – operations management at oil and gas facilities.

Located in the state of Maranhao in northern Brazil, the treatment plant conditions and cleans the natural gas from multiple gas fields. This process involves removing condensates (water and hydrocarbons) and filtering out solids. The natural gas is then compressed, conditioned and conveyed to a power plant approximately 1 km away, owned by the Brazilian operator ENEVA. The contract with the Brazilian STEAG subsidiary SESBR has been agreed for an initial term of two years. (STEAG/Si.)

The planned link-up of the district heating networks in the Rhine and Ruhr regions should deliver an efficient, innovative and environmentally friendly heat supply, and security of supply for the Ruhr area. The project reached a key milestone on 5 March 2015, when representatives of the participating district heating firms – STEAG Fernwärme GmbH (SFW), Energieversorgung Oberhausen AG (evo) and Fernwärmeversorgung Niederrhein GmbH (FN) – signed the contract for the formation of the new company. The joint venture is called Fernwärmeschiene Rhein-Ruhr GmbH. The contract for the flagship project was signed by the companies’ managing directors and board members: Udo Wichert, chairman of the executive board at SFW, Markus Manderfeld, managing director of SFW, Dr Thomas Götz, managing director of FN, Bernd Homberg, technical director and Hartmut Gieske, commercial director at evo.

Udo Wichert had this to say: “The project team and our partners from Dinslaken and Oberhausen have done sterling work over the past few months. I am delighted that we have founded the joint venture and can now work together on making this forward-looking project a reality.” Bernd Homberg, technical director at evo, believes the new network will bring many advantages: “There are four solid reasons why this project is a good idea: security of supply, price stability, climate protection, and responsibility for the future. As well as providing an alternative to night storage heaters, oil and natural gas, district heating will also keep prices more stable for our customers.” Dr Thomas Götz, managing director at FN, stressed the local nature of the project: “Linking up the networks will allow us to incorporate low-cost, local industrial and renewable generation systems.”

Shareholders in the new company are SFW (56.6 %), FN (25.1 %) and evo (18.3 %). The purpose of the joint venture is to plan, set up and operate the Rhine-Ruhr district heating network. Four separate subprojects are scheduled to create the link between the Lower Rhine and Ruhr district heating networks. It will be possible to incorporate additional industrial and renewable heat sources into the supply system. These will include waste-fuelled heat and power plants, gas and coal-fired power plants, industrial plants and their waste heat, and heat from renewable combined heat and power (CHP) plants. This will give all the project partners access to large amounts of carbon-free waste heat and large volumes of CHP energy. Fernwärmeschiene Rhein-Ruhr will therefore make a significant contribution to the carbon and CHP goals of the state of North Rhine-Westphalia.

The idea is for the connection to run from the existing section in southern Bottrop to the Lower Rhine district heating network in northern Duisburg. The precise route is still being worked out. It should mainly run across land that is under public or industrial ownership. If everything goes according to plan and the partners in the joint venture reach a positive decision on construction by the first quarter of 2017, the first subprojects could go into operation after a two-year construction period. The Lower Rhine and Ruhr district heating networks could therefore be joined up as early as 2019. When that happens, industrial waste heat, CHP, and heat from renewable energies and waste-to-energy plants will give the region from Moers to Herne a low-carbon heat supply that is drawn exclusively from local sources and is secure for the long term. (Fernwärmeschiene Rhein-Ruhr GmbH/Si)