Power Engineering - Steag vital signs strong

26 May 2006 - Germany's fifth largest power generator Steag AG, headquartered in Essen, has reported a successful 2005 with all vital indicators showing strong upward trends.

Sales revenues more than trebled in comparison with the previous year and post-tax earnings grew by about 54 per cent. Among the reasons for these achievements were successful integration of all the RAG Group's energy activities into Steag and superior performance by the divisions.

"In the coming years the new construction of hard coal fired power plants - such as in Duisburg-Walsum and in Herne - will be of great strategic significance", said Dr. Alfred Tacke, Chairman of the Steag AG Management Board. "Those plants represent vital stepping stones toward enhanced earning power at Steag."

The Group's external sales rose against the 2004 figures by €3,556mm to €4,965m. Two-thirds of total revenues were accounted for by the new divisions Gas Distri-bution (Saar Ferngas AG) and Coal Trading (RAG Verkauf GmbH), both of which were acquired effective January 1, 2005.
Pre-tax earnings showed a significant rise of 41 per cent, to €326.5m. Post-tax profits also rose, from €183.7m to €282.2m._ _The EBITDA figure reached €535.1m (€337.2m). EBIT, too, at €439m was well above last year's value of €289.3m.

Capital expenditure in the Steag Group came to €o;877m. The increase in staffing, to 4883, was due largely to the consolidation of the energy generating activities of the RAG Group in the Rhine, Ruhr and Saar regions. As per the terms of the Control and Profit Transfer Agreement, €126.9m were transferred to RAG Beteiligungs-GmbH. €130.6m were allocated to retained earnings.

During the 2005 reporting year construction work for the hard coal power plant at Mindanao in the Philippines progressed according to schedule. Steag's third overseas power plant (with an installed capacity of 232 MW and $305m in investment volume) will commence commercial operation in November 2006 and then cover about 15 per cent of the power requirements for the island of Mindanao with its 14m residents.

The Steag Saar Energie subsidiary is well prepared for expansion in the fields of decentralised energy supply and renewables. In the foreground here are projects in Germany and eastern Europe. One good example is the power plant slated for construction at Rogesa, Germany. There Steag Saar Energie, VSE and two partners from the steel industry - Dillinger Hütte Roheisengesellschaft Saar steel works and Zentralkokerei Saar coke producing company - have joined forces in an operator model aimed at constructing a blast-furnace gas fired power station. Projected investment volume is &EURO; 108m. VSE, working on behalf of the partners from the steel industry, will market the excess power and supply reserve and supplementary power at market prices. A 15-year operating contract is to be concluded with Steag Saar Energie. Trial operation is scheduled to begin in the fourth quarter of 2008, followed by the commencement of commercial operation on January 1, 2009.

A further project, the biomass power plant in Lünen, will be dedicated as planned on June 9 of this year. With an installed electrical capacity of 20 megawatts and &EURO; 54m in investments, this is one of the largest plants of its kind. As Germany's second-largest producer of power from hard coal - and with almost 70 years of experience in planning, building and operating thermal power plants - Steag sees itself in an excellent position to profit from the upcoming replacement and additional demand for hard coal-fired power generating capacity.

The company intends - in cooperation with EVN AG in Austria - to build a new generating unit (Walsum 10) at the Duisburg-Walsum site, delivering 750 MW in gross output. Investments here are to come to about &EURO;800m. The required public hearing took place in November 2005. The site will be readied for construction once the preliminary permit has been granted. Construction work is scheduled to commence in October 2006 so that this new facility can go into commercial operation on January 1, 2010, as planned.
Another 750 MW unit (Herne 5) is to be erected at the Herne site. The Walsum 10 plant serves as the template for the technical concept and preliminary planning has now been wrapped up. The partners will be municipal utilities interested both in long-term power deliveries and acquiring a share in the project. Up to 600 MW of this new facility's output is to be contracted by these partners, who will also be able to hold up to a 49 per cent share in the project. The application for the construction permit is being drafted, as are the requests for bids. Commissioning is projected for 2011.

"In addition, site studies are currently being conducted for another power plant project", Dr. Tacke noted. This project is to be realised by 2012, by the end of the second allocation period as per the national allocation plan for CO2 emission certificates.

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