* EU regulators says deal will not harm competition
* Predicts lignite will face competition from lower carbon
(Adds more on sale, debate over lignite)
BRUSSELS/LONDON, Sept 22 EU regulators cleared
on Thursday Swedish utility Vattenfall's sale of
German lignite power plants and coal mines in a deal that will
see it divest some of the most polluting fossil fuel generation.
The deal has whipped up controversy because the operations
are being sold to a new operator rather than closed down.
Environmentalists say lignite, the most carbon-intensive form of
coal, should no longer be burnt.
Vattenfall has said it will become one of the greenest
utilities in Europe and is also planning to sell another coal
asset in the next five years.
The European Commission said it had found the sale to Czech
energy group EPH and private equity group PPF Investments would
not adversely affect competition in the relevant markets.
Analysts say the economics of fossil fuel versus renewables
have shifted as sources such as wind and solar become cheaper
and the regulatory pressure mounts to scrap carbon-intensive
But many of those still supporting coal say it will have a
role as backup for intermittent renewables for years to come and
its life-time could be extended if technology to capture and
bury emissions becomes commercially viable.
EPH teamed up with Czech private equity group PPF
Investments, to buy the lignite coal assets from Vattenfall for
a nominal fee.
EPH has said the assets were among Germany's most efficient
lignite operations and would be among the last to closed without
indicating when that might be.
Once they are shut down, the owners will have to
rehabilitate the area, which Vattenfall estimated would cost 1.4
billion euros. ($1.6 billion)
A report from the Institute for Energy Economics and
Financial analysis published on Thursday concluded that could be
an underestimate and suggested an upper cost of 2.6 billion
euros based on previous clean-up bill.
EPH and PPF could still make a profit, especially as the
price of pollution permits, stuck at around 4 euros a tonne
, is very low.
The Vattenfall sale demonstrates investors will continue in
coal until there is regulatory certainty coal-fired generation
must end, analysts say.
"The EPH sale highlights the lack of clarity over the role
of lignite, the dirtiest form of coal, in Europe, and the
broader regulatory uncertainty over any phase-out," IEEFA
analyst Gerard Wynn said.
($1 = 0.8902 euros)
(Reporting by Philip Blenkinsop in Brussels and Barbara Lewis
in London,; additional reporting by Anna Ringstrom in Stockholm,
editing by William Hardy)