German coal giant’s unlikely conversion to clean energy

According to an article by Financial Times, Leag says it is on a mission to reinvest itself and secure the future prosperity of a region in Germany’s former communist east. Caliber.Az reprints this article.

There is a saying in the swath of eastern Germany known as the Lausitz that captures both the beauty of the region and the curse of its geology. “God created the Lausitz,” goes the expression. “But Satan put coal underneath.” 

Local people did a deal with the devil over the past 100 years: they let mining machines carve chunks from the lush green forests, destroyed centuries-old villages to dig up millions of tonnes of the dirty lignite that lies under them and polluted the planet in the process. In exchange came thousands of jobs and the pride found in powering the German economic juggernaut.

But the pact is running out of time. Europe is grappling with a record-breaking heatwave that threatens to become more commonplace and the 2038 deadline when Germany’s coal-fired power plants must be switched off is looming. That poses an existential challenge for Leag, the coal giant headquartered in the Lausitz city of Cottbus, and the thousands of residents who rely on it for work.

The company, which has four active opencast lignite mines and four coal-fired power stations, has made an unlikely pledge to reinvent itself as a powerhouse of renewable energy. At stake is not just the future of Germany’s second-biggest electricity producer behind RWE and its roughly 7,000 workers, but also the success of the energy transition in Europe’s largest economy, and the political and social prospects of this corner of the country’s former communist east.

“It’s the biggest energy transformation yet for Germany,” says Thorsten Kramer, the company’s chief executive, who previously helped transform a Spanish construction business into a renewables player. “In 15 years, our [current] business is over.”

Leag plans to use its vast holdings of land to build what it says will be Europe’s biggest solar farm and erect scores of wind turbines in a €10bn investment. The hope is that, by producing cheap, green energy, it will lure chipmakers, electric vehicle battery producers and tech companies of the kind that have already been dipping their toes in the water of other parts of the former German Democratic Republic, creating prosperity and jobs in the process.

But time is limited and the scale of the task is enormous. There is also deep scepticism from environmental groups and some local people about the commitment of Leag’s owner, the Czech “coal king” Daniel Křetínský, who staked billions on the idea that Europe’s fossil fuel phaseout targets were overambitious, snapping up coal assets from the UK to Slovakia.

Křetínský, who also owns stakes in the English Premier League club West Ham and is expected to take over the French retailer Casino, bought Leag via his sprawling conglomerate EPH from the Swedish group Vattenfall in 2016, months after the German government signed up to new emission targets at the Paris climate conference. The company’s pan-European coal operations generated more than €3bn of its €37bn in revenues last year.

Fabian Hübner, from the campaign group Europe Beyond Coal, says that asking a coal company to play a central role in the energy transition is laughable: “It’s like asking a villain to change course.”

Going green

Joining one of Germany’s biggest coal companies might have seemed like an odd choice for Fabian von Oesen, a 34-year-old civil engineer who had spent most of the previous decade working on offshore wind. But von Oesen, who grew up not far from Cottbus, was drawn by the opportunity to turn one of Europe’s dirtiest companies green. “I feel needed and required,” says von Oesen, who has worked for Leag since 2019 and now heads the company’s renewables division. “That motivates me.”

Standing on the rooftop of the company headquarters, he points out three of Leag coal-fired power stations dotted across the horizon. At one of them, the 1970s-era Jänschwalde power plant, two mothballed units were brought back online last year as the Ukraine crisis forced Germany to increase coal production to compensate for the loss of Russian gas. 

Later, von Oesen hops into an electric VW SUV and sets off on a drive out of the city, through fields of rye bordered by bright blue cornflowers. He stops at a scrubby wide open expanse — a former opencast mine that is slowly being filled with water with the aim of making it part of a man-made “lake district” that will draw visitors from across Germany and beyond.

In one still-dry section, rows of 34 tall steel rods protrude from the ground. They will support “floating” photovoltaic [PV] solar panels. “I’m extremely proud of this project,” says von Oesen, adding that many companies dismiss the idea of putting solar panels on water as too expensive. “Anyone can do a normal PV plant but we started with something like this.” He adds: “Even EPH, who are very focused on betting on coal, were open to making this possible.”

Combined with about 5,500 hectares of wind turbines and 6,000 hectares of land-based PV panels that will constitute one of Europe’s largest solar farms, they will form what Leag has branded its “gigawatt factory” — a renewable energy hub with a combined capacity of 7GW. The company plans to double that to 14GW by 2040.

The 7GW of renewable power capacity, which will be dependent on levels of wind and sunshine, will not directly equate to the 7GW capacity of Leag’s lignite power stations that are run around the clock and produce about 9 per cent of Germany’s electricity. That is partly why the plan also includes four new power plants fuelled by gas — seen by Berlin as a crucial “bridge” fuel in the energy transition — that can be adapted to use green hydrogen in future, as well as a power storage facility and a hydrogen production unit.

It is an audacious plan for a company that not only has no prior experience in renewable energy but has also been a significant contributor to Germany’s CO₂ emissions. 

Leag does, however, have some big advantages, most notably its land holdings that stretch to 33,000 hectares, making it one of the biggest landowners in the region. It has gone on a hiring spree in recent years, recruiting about 100 experts in renewable energy.

But it is also experiencing many of the same obstacles that other wind and solar developers in the country are facing, including approval processes that remain sluggish despite a promise by Germany’s chancellor, Olaf Scholz, of a new “Deutschland Tempo” to speed them up and meet the country’s climate change targets. Germany has committed to producing 80 per cent of the country’s power from renewables by 2030 and being climate neutral by 2045 — all without nuclear energy after closing down the last remaining nuclear plants in April this year.

“Municipalities have one or two people who are responsible for permitting — and they have thousands of applications to deal with,” says von Oesen, estimating that it takes two to three years to jump through all the necessary hoops to build a solar farm, and six years for wind. He reels off a string of other hurdles, from wind turbine supply chain bottlenecks to issues adapting the electricity grid and securing access to hydrogen pipelines.

Still, he is adamant that Leag will meet the solar and wind deadlines that it has set. He is driven by the thought of securing a future for a region that, after the fall of the Berlin Wall, witnessed an exodus of talent. “I would be very happy if [future generations] have the possibility to stay,” he says.

A town divided

The upheaval of that time still hangs heavily over the Lausitz. Cottbus had been an important centre of both coal mining and textiles during the time of the GDR. The lignite industry at its peak employed about 100,000 people across the region.

After German reunification in 1990, the area suffered a collapse in local industry, a surge in unemployment and a huge outflow of people, especially the young. “The deindustrialisation was very painful and disastrous,” says Steffen Krestin, director of the Cottbus city museum.

Krestin sees the plan to transform the area from a coal mining polluter into a renewables hub as another “watershed moment” for the region. He is an optimist: he thinks the concept is ambitious but possible, with a chance for a new, post-coal economy and identity for its people. But he concedes that the town is “divided” over the green transition, with some feeling deep unease and uncertainty.

It is a mood that has been harnessed by Germany’s far-right party, the Alternative for Germany (AfD), which has long counted Cottbus as one of its strongholds and is causing jitters among mainstream politicians by polling at a record high nationwide. “People feel very insecure here because the direction everything is taking is not clear,” says Jean-Pascal Hohm, the 26-year-old head of the party’s Cottbus branch. 

Hohm concedes that Cottbus, which has a university, a vibrant café scene and an annual film festival, does not feel deprived or depressed. “The question is what will happen in 10 to 15 years,” he says, arguing that there will not be as many jobs in green energy as there were in the mines.

A detailed plan for retraining each staff member has been one of the central demands of those representing Leag workers. The company plans to prioritise younger employees with decades of work still ahead of them; older ones can benefit from a generous scheme that lets them retire on full pay. “The young are the most afraid,” says Reni Richter, whose IG BCE trade union represents close to 90 per cent of the company’s workers. “We lost a whole generation [after the fall of the wall] and we are afraid to lose the next.” 

Kramer, the Leag chief executive, is aware of how much is at stake. “Cottbus, where this company is based, has [a population of] 100,000 people — and close to 10 per cent are working in our company,” he says. “We have also responsibility for our staff, for the region.” 

Yet he acknowledges that Leag will employ far fewer people in future — about 1,000. That is why he is pinning his hopes on the idea of using affordable clean energy to lure other big investors: “The idea is [that] we put so much green energy into this region . . . that a lot of big industry will come to this region and create new technology-driven jobs.”

There are some indications that the area could be appealing to the giants of industry of the future. Other parts of east Germany have recently drawn high-profile investments from big multinationals, including chipmakers Intel and Infineon and the carmaker Tesla. The German chemicals giant BASF this month opened a recycled battery material production and recycling facility in Schwarzheide, around 50km from Cottbus.

Some Leag employees, however, say that while they support their bosses’ transformation plan, they worry that the pace of change in the region is not quick enough to secure their futures. “Our biggest problem is time,” says Lars Katzmarek, a technician who is also an ambassador for the Lausitz at a confederation of German trade unions. He points to a longstanding plan to expand the single-track railway line on part of the route from Berlin to Cottbus that is not due to be completed until the end of 2027, adding: “How will we be able to plan and develop if simple infrastructure problems are not solved quickly?”

These broader obstacles help explain why many in the region are opposed to a push by the Green economy minister, Robert Habeck, to follow Germany’s other big coal region, North Rhine-Westphalia, in bringing forward the coal phaseout to 2030 to accelerate emissions reductions. 

Leag argues that it is not realistic to fully replace the coal-fired power it produces with renewable sources in just seven years. 

Simone Taubenek, the independent mayor of the Lausitz town of Forst, says that the region would receive “lots of money” if it agreed to an earlier date. But, she says, “money is not everything”, adding: “We need time for improving infrastructure and a lot of other things.”

Germany cannot afford to bungle the transition of her region, she warns. “The gigawatt factory story must be successful,” she says. “It’s a pilot project. A very important one. Everyone needs it to work out.”

Rewards of reinvention

It is disconcerting for some in the Lausitz that the fate of the area — and Germany’s future energy supplies — is in the hands of a Czech billionaire with little connection to the region. 

Environmentalists have long feared that the company, which they see as secretive and not transparent, will simply pocket the €1.75bn package of state subsidies that comes with the 2038 phaseout deal, although the EU has yet to approve it. Or that it will squeeze profits from coal and then abandon the area, leaving taxpayers to pick up the cost of recultivating it. 

Leag’s owners EPH and PPF, a Czech private equity group, say that is untrue, pointing out that they have not received any dividends since buying the company in 2016 due to government-imposed strictures. Daniel Častvaj, an EPH spokesman, says that the profits — including last year’s bumper earnings due to the coal revival since Russia’s invasion of Ukraine — are being retained within the company to finance the transition.

“Our investment in Leag is seen more as a mission rather than a typical business venture,” insists Častvaj. “Our objective is to effectively manage the social and ecological transformation not only within this significant company but also throughout the entire region that relies on it. The transition from coal to renewable sources presents a remarkable opportunity.”

The transition from coal to renewable sources presents a remarkable opportunity

Though many still puzzle at the game plan being pursued by Křetínský, nicknamed the “Czech Sphinx” for his opaque manner, at Leag, it may be simply that he has realised that there is money to be made in green energy thanks to the company’s large landholdings. That has made some other players in the renewables industry uncomfortable. “They’re basically sitting on a mountain of cash,” says one wind industry insider who feels that Leag has an unfair advantage because some of its land was obtained through expropriation during the communist era. “A coal company that hasn’t committed to the transition in the past, and has stalled it, will benefit hugely.” 

However, even the Green minister Habeck, who is not a natural ally of the coal companies, seemed to have softened in tone in a visit to Leag last month. Praising the company’s transformation plans, he said: “This is what we need now.” He appeared more relaxed about the official timing for shutting down the company’s coal-fired plants, arguing that energy produced from lignite may no longer be profitable by the start of the next decade and that a phaseout “corridor” would occur naturally in that period.

Johannes Staemmler, an academic who spent four years researching local views on the coal exit in the Lausitz and now serves as an adviser to the president of Brandenburg University of Technology, believes the debate about timing is largely irrelevant. “People are ready,” he says. “Not everyone is the stereotypical stubborn coal worker.”

He tells an anecdote that, for him, represents the journey that the region has been on. He says: “When I came to Cottbus four years ago on a retreat with my team, I saw a car with a ‘Fuck Greta’ sticker” — a reference to the Swedish climate campaigner Greta Thunberg. “Now it’s the coal company itself doing renewables.”