UPDATE 1-German government approves lignite compensation contract

* Contract awards 4.35 bln eur to lignite station operators

* Contract to be signed soon - RWE (Adds RWE comment)

BERLIN, Dec 16 (Reuters) - The German government on Wednesday approved a contract that compensates the country’s operators of lignite-fired power plants for an accelerated shutdown of their assets.

The deal, part of Germany’s effort to completely wean off coal by no later than 2038, covers a total of 4.35 billion euros ($5.29 billion) in payments to utilities, which will also waive any rights for future lawsuits if they sign it.

RWE and Leag, which is 50-50% owned by Czech energy group EPH and private equity group PPF Investments, are by far the largest operators of lignite, or brown coal, power plants and mines in Germany.

“The government and the operators aim to sign the contract soon,” RWE said.

The European Commission said last month that it will likely launch a formal investigation with regard to the agreement on competition grounds.

$1 = 0.8226 euros Reporting by Markus Wacket and Christoph Steitz; writing by Vera Eckert; editing by Thomas Seythal;Editing by Elaine Hardcastle