Mon 03/15/2021 13:31 PM
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Relevant Documents:
Consolidated Financial Statements 2019
Combined Management Report 2019
Press Release FY’19
Closure of Saarland Power Plants

German utility group Steag has brought in restructuring advisors to find a solution for its upcoming maturities, interest payments and find a long-term exit solution for its shareholders, sources told Reorg. The company is also in discussions with its lenders to secure a standstill agreement. Continue reading for our EMEA Core Credit team's update on Steag's potential restructuring, and request a trial for access to our analysis and reporting on hundreds of other stressed, distressed and performing credits in the region. 

Holding company Kommunale Beteiligungsgesellschaft (KSBG) is advised by PJT and Milbank, while Steag is working with German law firm Wellensiek. Roland Berger is working on a restructuring opinion according to IDW S6 on behalf of Steag, sources told Reorg. KSBG is a consortium holding company owned by six utilities groups which are in turn fully or partly owned by the cities of Dortmund, Duisburg, Bochum, Oberhausen, Dinslaken and Essen. Steag’s bank lenders are advised by Latham & Watkins, sources said.

The group has been suffering from underperformance due to having to close most of its coal-fired power stations as part of Germany’s energy transition away from fossil fuels.

Steag’s underperformance has led to the suspension of a dividend paid to the holding company. The dividend was used to service the holding company’s debt. Shareholders have so far not been willing to inject new money to service the holding company’s debt, sources told Reorg.

On the other hand, Steag will be able to finance its transition and operational restructuring towards smart and holistic energy solutions through its existing cash resources and cash flows, and does not require a new money investment, sources told Reorg. Long-term the shareholders are expected to attempt a sale of the business to exit their investment, sources added.

In 2018, the group transferred €45 million to its owner the KSBG. The investment company RAG Stiftung is currently in talks with the shareholders about whether to place Steag into a trusteeship with them to support the company’s transformation process. Having one entity representing the shareholders is expected to facilitate talks with lenders, sources commented.

The company’s reported total financial liabilities are €1.55 billion as of the end of 2019, according to its latest annual report from that year. Consolidated sales in 2019 fell to €2.1 billion from €2.9 billion a year earlier. Steag’s EBITDA rose to €372.5 million in 2019 from €307.1 million in 2018. The group had planned about €212 million in investments for the year 2020.

An overview of the 2019 financials is below:

Steag recently appointed Carsten König from Alix Partners as chief transformation officer to support the business in its reorientation towards growth areas. Since legislation putting an end to coal-fired power generation (KVBG) entered into force, it has been clear that over the course of the coming years, Steag will gradually have to shut down and decommission most of its hard coal-fired power plants in Germany, the group said in October 2020. The only exception is Walsum 10, which only went into operation in 2013. As a result the group recently announced the closure of two plants in Saarland.

Management also said other coal-fired plants, which are still active in 2026 will have to be decommissioned without any compensation payments.

Steag’s capital structure is below:

Steag GmbH


EBITDA Multiple

(EUR in Millions)





Project Financing - Walsum 10 Power Plan 1


Project Financing - French Wind Farm


Project Financing - Energy GmbH


Other Project Financing 2


Total Project Financing



€400M Steag GmbH Bonded Loan 3


SFW Energia Borrowings 4


Power Prepayment Agreement 5


Other Bank Borrowings 6


Loans from Non-Bank 7


Credit Line and Margining 8


P/L Transfer Agreement Liabilities 9


Compensation Payments Obligations 10


Earn-Out Agreement 11


Non-Controlling Interest 12


Other Financial Liabilities 13


Total Other Debt



Lease Liabilities 14


Total Lease Liabilities



Project Financing - Mindanao Power Plan 15


Total Recourse Financing



Total Debt



Less: Cash and Equivalents


Plus: Restricted Cash


Net Debt



Operating Metrics

LTM Revenue





Plus: Cash and Equivalents


Less: Restricted Cash


Total Liquidity


Credit Metrics

Gross Leverage


Net Leverage


The capital structure is on a post-IFRS 16 basis. The group's debt remains largely unchanged in 2020. EBITDA is as reported by the company. Restricted cash refers to the amount pledged as collateral for group liabilities and the amount subject to other restrictions on use.
1. The creditors received security in the form of pro rate guarantees from sponsors in the construction phase and the start-up phase. Since the start of the operating phase, creditors' rights have been secured by land mortgages, liens on the group's project shareholding and the assignment of rights to future receivables.
2. Including financing for Steag Windpark Ullersdorf GmbH & CoKG, Steag Battery Systems GmbH, Steag Ruzgar Suloglu Enerji Yatirim Uretim ve Ticaret AS, and Entega Steag Warme GmbH.
3. In 2019 the group has repaid tranches amounting to €140.5M and made new tranches of €81M.
4. To refinance intragroup loans.
5. Concluded in 2016 with a financing character.
6. Calculated as the remainder of liabilities to banks.
7. Detail not disclosed in the report.
8. In connection with exchange-traded forward agreements.
9. Related to KSBG KG.
10. To non-controlling interests.
11. In connection with the acquisition of the Bexbach power plan, Steag Solar Energy Solutions (Italia) Srl and Steag Solar Energy Solutions GmbH.
12. In Steag Windpark Ullersdorf GmbH & Co KG.
13. Calculated as the remainder of other financial liabilities.
14. Mainly due to IFRS 16.
15. In the advance repayment phase. Security in this is exclusively via non recourse financing.

Steag is an energy company, whose main activities comprise planning, construction and operation of large power plants and distributed facilities. It is active in energy generated from coal, sun, wind, biogas and biomass. Steag operates nine coal-fired power plants along the Rhine and Ruhr rivers and in the Saarland, and another three abroad.

An overview of the ownership structure of the Kommunale Beteiligungsgesellschaft GmbH (KSBG) is below:

In 2020, Germany’s government decided on a phased approach to close all coal-fired power plants until the latest 2038 and passed legislation in July 2020 accordingly.

As part of the exit strategy, Germany is offering compensation payments to coal-fired power plant operators in auctions until 2026 but Steag has complained that the maximum prices in the auctions are unreasonably low, according to a report by S&P. At the last auction on Jan. 4, the highest bid was at €155,000/MW. The company submitted an unsuccessful complaint about Germany’s coal exit legislation to the federal constitutional court in August.

The government differentiates between lignite-fired coal plants and hard-coal fired power plant operators with the former receiving compensation after bilateral negotiations with the government. Steag’s coal-fired power plants are run on hard coal.

--Aurelia Seidlhofer
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