E.ON bows to political pressure and keeps nuclear plants
The group also said it expected to record impairment charges in the “higher single-digit billion euro range” because of low wholesale power prices. E.ON’s shares plunged more than four percent in reaction to the announcement.
The group’s CEO, Johannes Teyssen, explained in a newsletter government plans to make utilities permanently liable for the costs of nuclear decommissioning created unacceptable risks for the company’s previous plans to transfer nuclear activities to spin-off Uniper.
The government plans to close a legal loophole to prevent utilities from evading the multi-billion euro costs for the country's nuclear phase-out. Under current laws, the utilities are only liable for spun off companies for five years. According to the new draft law, the companies would be liable for as long as it takes, even if they spin off their nuclear activities. Energy minister Sigmar Gabriel has called the proposal the “parents are liable for their children law”.
Teyssen reiterated that he deemed a change to the liability limit to be unconstitutional, but he added his company didn’t have the time to wait for the outcome of a legal dispute which might take years.
E.ON said it still operated three active nuclear power plants in Germany and had minority shares in three others. The company said as a consequence of this change in strategy, about 2,300 employees will not be transferred to Uniper as previously planned. The nuclear activities and the employees will instead be transferred into a separate unit named “PreussenElektra”, which will be based in Hannover.
Apart from the nuclear activities, the “new” E.ON will also consist of networks and renewables, while Uniper will inherit the remaining power plants, energy trading and the group’s oil and gas activities.
Germany’s Energiewende - a dual move to phase-out nuclear power and to create a low-carbon economy through renewable energy - has left the four major utilities that have dominated the market for decades struggling. E.ON, RWE, EnBW and Vattenfall have started to adjust their business models - yet despite some drastic steps, their future role in Germany's greener, fast-changing energy markets is far from clear.
Utilities are liable to pay for most of the costs of ridding Germany of its nuclear heritage. But the companies’ economic troubles have stirred fears they might not be able to do so. By the end of 2014, the utilities had set aside 38 billion euros for this task. But critics doubt whether this money will be available when needed and also question whether it will be enough, given huge uncertainties about the costs of decommissioning nuclear plants and storing radioactive waste. This is why the Ministry for Economic Affairs and Energy is currently stress-testing the reserves made by the big four utilities E.ON, RWE, EnBW and Vattenfall.
Read the Factsheet “Securing utility payments for the nuclear clean-up” here.
Find the Factsheet about “Nuclear clean-up costs” here.
Read the Factsheet “Legal disputes over the nuclear phase-out” here.
Read a dossier on the utilities struggle to cope with the Energiewende here.