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Coal-fired conundrum

19 November 2008

Germany's coal-fired power plant pipeline is extensive, politically contentious and with the change in lending environment will now have be banked via large club deals that will prove complicated to negotiate. By Michael Marray.

Having decided to phase out its nuclear power plants, Germany is in the midst of a major construction programme of new coal-fired power plants as exemplified by Trianel's Lunen project which closed earlier this year.

However, project sponsors find themselves caught between a shortage of debt capacity from project lenders and fierce protests from environmental groups who oppose the building of new-coal fired plants because of their high CO2 emission levels.

At the same time, the big utilities are understandably conservative about their balance sheets, and may feel that now is not the right time to press ahead with new plants in a controversial segment of the electricity market.

The situation is further complicated by changing European Union rules which will see a reduction in free allowances under the Emissions Trading Scheme (ETS), meaning that increased CO2 prices will need to be factored into German power prices. Meanwhile there is...

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