Lights out

Coal House Blues

Photo-Ruin-RWE-Nuclear-Power-Plant-2004-Energy-Atomkraftwerk-Demolition-in-Arneburg-former-East-Germany-Source-DPA-Peter-Förster
If coal-powered energy is no longer needed in Germany, RWE's plant may end up in ruins. 

A series of engineering blunders continues to haunt a new coal-fired power station in North Rhine-Westphalia, under construction since 2008 and expected to provide electricity to 3.5 million homes.

Of the two units originally planned, each with a capacity of 800 megawatts, the first was completed only two weeks ago – two years late. And it’s unclear whether the second unit may ever go online, according to sources close to Handelsblatt.

RWE has informed its partners – 23 municipal utility firms which hold 23 percent – that it will not be able to complete the project by June 22, 2015, as planned.   The energy firm declined to name a new date.

Alstom, the French maker of the steam generators, which is supplying technology to RWE, ran into difficulties and has now withdrawn its renovation plans.

Meanwhile, the project’s price – initially estimated at €2 billion ($2.5 billion) – continues to rise. RWE confirmed that costs have increased by €400 million so far. The final price tag could be as high as €3 billion, according to the sources.

In August, Alstom discovered “cracks” in the steam boiler, caused by the steel, called T24. The alloy was chosen because it supposedly allowed more pressure in steam production and thus more electricity to be produced. The difficulties started when the weld seams became permeable.

The situation worsened last year. Large amounts of hydrochloric acid entered the boiler tubes when the first unit was supposed to start operations. The acid is necessary to prepare the water for the boiler and release minerals, but it should not enter the tubes. Apparently, the cleaning solution was not sufficiently separated. As a result, extensive repairs were needed.

Even more troublesome, relations between the developer and the construction firm were damaged as the two parties argued over liability for the delays. That disagreement came on top of other disputes already in court. Alstom’s liability was initially limited but RWE has accused the supplier not only of negligence, but also of causing the intentional damage.

“For municipal companies, this project is a huge disappointment and an enormous burden.”

Peter Blatzheim, Municipal utility

Alstom claims RWE needs to clarify any issues about the entry of the hydrochloric acid. The energy company, in turn, has been passing the buck by referring questions to the investigators currently looking into the acid’s effects.

The project is worth hundreds of millions of euros, which the energy supplier needs. Its power business already faces difficulties. RWE Generation has been forced to cut costs by €800 million.

“For municipal companies, this project is a huge disappointment and an enormous burden,” said Peter Blatzheim, who leads the municipal utilities for Troisdorf, a small town near Cologne. “It’s pretty clear that the conditions we were presented with at the start are not going to work out. We’re disappointed with RWE.”

 

RWE's new brown coal-powered electricity plant in Neurath which was completed in 2012 and required investments of €2.6 billion. Source: RWE
RWE’s new brown coal-powered electricity plant in Neurath which was completed in 2012 and required investments of €2.6 billion. Source: RWE

 

The other municipal utilty partners are also unhappy. “It’s a major economic burden and a huge challenge,” said a spokesperson from DEW21.

The partner are now calling for compensation possibly in the form of larger participation in the first unit, which is up and running.

The municipal utilities own 25 percent of RWE and also have four votes on the supervisory board, which hires and fires chief executives and confirms decisions made by the board of management.

 

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Like other electricity producers in Germany, RWE is suffering from the country’s shift to wind and solar power and away from nuclear energy. Faced with write-downs and sagging profits, the utility has slashed its dividend to €1 per share in 2013 from €3.50 in 2009. RWE had debts worth €31.5 billion at the end of June.

 

Author Jürgen Flauger is Handelsblatt’s specialist reporter for the energy sector, covering utility firms, energy policies and international market developments. Contact: Flauger@handelsblatt.com 

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