Nuclear Exit Hits German Energy Giants

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German energy companies have reported losses amounting to billions of euros as a result of the German government's decision to dump nuclear power.

RWE AG (OTC:RWEOY) (Essen, Germany) and E.ON AG (OTC:EONGY) (Dusseldorf, Germany) have turned in mixed financial figures for the first nine months of 2011, with both companies pointing the finger at the government's nuclear power U-turn in May as a key contributor to their losses.

E.ON claimed that for the first nine months of this year, the combination of the government's nuclear fuel-rod tax and the its plans to rapidly exit the nuclear power sector had cost it €2.3 billion ($3.1 billion). RWE reported that while revenue was on a similar level, earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 21% to €6.2 billion ($8.4 billion) in the first three quarters of the year, and the operating result fell 30% to €4.3 billion ($5.8 billion). E.ON, although it recorded a 21% increase in nine-month revenues, reported that EBITDA slumped 39% to €6.6 billion ($8.9 billion).

"The positive developments of the past few weeks cannot, however, hide the fact that our 2011 fiscal year will be marked by the accelerated phase-out of nuclear energy, lower electricity generation margins and heavy burdens in our gas midstream business," explained Dr. Rolf Pohlig, RWE's chief financial officer. "The curtailed lifespan of our nuclear power plants in Germany alone, coupled with the recently imposed nuclear fuel tax, led to a decline in the operating result of around €1 billion ($1.35 billion)."

RWE is currently fighting a legal battle with the government over the legality of the nuclear fuel-rod tax, which was imposed on all German nuclear plant operators on condition they were allowed to extend the lives of their older nuclear plants. Despite reversing its decision on those extensions, the government is still demanding the tax.

Pohlig said: "In the legal dispute over the new nuclear fuel tax, our legal position has been confirmed by the rulings of tax courts in Munich and Hamburg. In early October this year, the Munich Tax Court expressed doubt concerning the legality of our tax notice and ruled that we do not have to pay any nuclear fuel tax for our Gundremmingen nuclear power station for the time being. As much as we welcome the decision of the Munich Tax Court, it currently has no direct effect on our earnings."

In May this year, just months after the nuclear disaster at the Fukushima plant in Japan, Germany announced a surprise reversal in its nuclear policy. Instead of extending the lives of its older nuclear plants, it opted to get rid of nuclear power altogether. Germany now aims to have all 17 of its reactors shut down before 2022. For additional information, see May 30, 2011, article - Germany Votes to Dump Nuclear Power.

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