German utilities seek clarity on energy policy

Thursday, 12 August 2010

Two of Germany's largest power utilities - EOn and RWE - have warned of the financial impact of the government's proposed tax on nuclear fuel, saying that investment in new generating capacity may have to be cut if it is introduced. 

 

Under current legislation, German nuclear power plants are limited by a set of generation quotas that effectively limit reactor lives to an average of 34 years, compared to an economic life of up to 60 years. This has been under review since the general election of September 2009 resulted in a coalition government free from anti-nuclear parties.

 

"I believe there's no   doubt that in the   medium term Germany   can't forego zero-   carbon, inexpensive   nuclear power if it   intends to continue to   play a leadership role in   Europe's climate-   protection effort and if   the economic recovery   is to continue."     Johannes Teyssen    CEO of EOn

In its October 2009 coalition agreement, the German government agreed in principle to extend the operating lives of nuclear power reactors. In June 2010, the government passed a cabinet resolution for a tax on the nuclear energy industry. Its purpose is to generate €2.3 billion ($2.8 billion) in tax revenues from nuclear fuel between now and 2014 to help consolidate the federal budget as part of the government's deficit-reduction plan.

 

While reporting EOn's first half results for 2010, CEO Johannes Teyssen said: "There has long been a lack of clarity about the direction of Germany's energy policy. This needs to change. As the federal government stated, Germany needs a non-ideological, technology-neutral, and market-based energy strategy that includes an environmentally and economically sensible decision on the future of nuclear energy in this country. Only then will Germany make a real start towards its energy future."

 

He added, "Ten months after the government's statement - which we thought signalled a new, pragmatic beginning - Germany's future energy policy course remains unclear. Important decisions need to be made, including a decision about the future of nuclear energy in Germany. I believe there's no doubt that in the medium term Germany can't forego zero-carbon, inexpensive nuclear power if it intends to continue to play a leadership role in Europe's climate-protection effort and if the economic recovery is to continue. The recent crisis made abundantly clear to what degree Germany's economic success depends on the competitiveness of its industry, for which a secure, economically priced energy supply is a decisive factor. Nuclear energy is a key component of this energy supply."

 

Teyssen said, "In this context, we're quite willing to share the advantages of extending the operating lives of nuclear power stations as long as the state's share is reasonable in comparison with the additional revenues. But we also warn against the creation of additional financial burdens that would render the operation of nuclear power stations uneconomic and that could even result in urgently necessary investment funds not being available for the environmental transformation of the energy supply. I've made it unmistakably clear to policymakers that we consider such a course to be a mistake, both economically and environmentally."

 

Speaking of the proposed nuclear fuel tax in its financial report, EOn said: "We must assume that it would adversely impact our pre-tax earnings by about €1.3 billion ($1.7 billion) to €1.5 billion ($1.9 billion) annually." The company noted, "The introduction of a tax of this size would lead to a marked deterioration of EOn's debt figures, which may result in significant reductions in our investments."

 

"It is unclear at this time whether the tax will be introduced independently of, or in parallel with, the extension of nuclear power plant operating lives," EOn said. "Depending on how some of the open issues in the energy plan and tax are resolved, individual nuclear power plants could be rendered uneconomic."

 

Meanwhile, RWE's CEO, Jürgen Grossman, echoed Teyssen's concerns, saying: "Such a tax would substantially diminish our earnings power - and thus our financial scope for investment in renewables, low-carbon power stations and smart grids." He called for the government to make clear statements about Germany's future energy policy, saying, "This is urgently needed for our long-term investment plans."

 

RWE announced its medium-term goals in February. In a statement the company said: "In view of the growing political risks and burdens, however, RWE will now have to review both its medium-term goals and its investment plans."

 

A final decision on changes to the phase-out and the related profit share is expected to be included in the National Energy Plan by October this year, following the initial submissions in July. The relevant ministries are also examining retrofitting requirements for nuclear power plants.

 

Researched and written

by World Nuclear News