LEAG can acquire Wismar Pellets

The Bundeskartellamt has cleared the acquisition of Wismar Pellets GmbH by Lausitz Energie Vorsorge- und Entwicklungsgesellschaft Brandenburg mbH & Co. KG (LEAG) within the one-month deadline of first-phase merger control.

Andreas Mundt, President of the Bundeskartellamt: “The wood pellet market is in motion. LEAG already has three pellet plants in Saxony, Saxony-Anhalt and Brandenburg, and by acquiring Wismar Pellets it will also own the largest pellet plant in northern and eastern Germany. We examined the project in great detail and found that ultimately it will not pose a serious competition problem. Regarding the sale of pellets to private households and small businesses, there are no geographical overlaps in the parties’ operations. The supply to larger customers involves longer transportation distances and a great number of competitors, including integrated pellet businesses which are connected to sawmills. Customers will still have sufficient options to choose from on all the markets affected.”

With an annual capacity of approximately 250,000 tons of wood pellets, Wismar Pellets ranks among the leading pellet producers in Germany. From its plant in Wismar the company distributes the products throughout Germany via six warehouses run by its distribution subsidiary Best Pellets or other intermediaries. It also exports substantial quantities of pellets to Denmark, Belgium and the UK via the port in Wismar. LEAG only entered the market in 2022, when it acquired three pellet plants. The company almost exclusively sells to businesses which offer fuel and agricultural products at the regional level as well as a few large-scale customers.

Background

Germany is the European market leader in wood pellet production. Using pellets is considered an environmentally friendly way of generating heat or energy. Investigations have shown that there are about 50 certified pellet producers and at least 150 certified pellet distributors operating in Germany. At the regional level, final consumers are supplied by a large number of distributors.

Last year, the war in Ukraine and the increased prices for gas and oil, in particular, led to a very sharp increase in demand for pellet burning systems and pellets. Due to new stoves being installed in many homes and the fear of a shortage of supply, the demand for pellets in summer – rather untypically for that season – was very high and tended to rise. This coincided with an increased demand from abroad. Wood pellet prices increased very sharply and untypically for that season, too (they in some cases quadrupled). Pellet prices have currently fallen significantly and are approximating the 2021 price level. Traditionally Germany has always seen an oversupply of pellets, meaning that over the past ten years more pellets were produced than consumed. This situation is expected to remain unchanged.