Utilities Lawsuit

Court Weighs Nuclear Shutdown Costs

ARCHIV - Blick nach Sonnenuntergang am 23.08.2009 auf die Kühltürme des Atomkraftwerks Grafenrheinfeld (Unterfranken). Davor sind Strommasten und -leitungen zu sehen. Jede Interessengruppe versucht, die öffentliche Meinung für seine Interessen zu gewinnen. Selten wird das Ausmaß aber bekannt wie nun die Arbeit der Atomlobby vor der Bundestagswahl 2009. Das Atomforum gibt sich gelassen und betont: Greenpeace mache nichts anderes. Foto: Daniel Karmann dpa (zu dpa-Korr "Enthüllung zur Lobbyarbeit der Atomindustrie" vom 29.10.2011) +++(c) dpa - Bildfunk+++
In Karlsruhe, a heated debate is underway.
  • Why it matters

    Why it matters

    • As Germany hastens to clean energy, the question is whether the government or utilities will cover the huge losses incurred.
    •  
  • Facts

    Facts

    • Germany aims to phase out all nuclear energy in the country by 2022 and draw at least 80 percent of energy from renewables by 2050.
    • Shortly after the Fukushima disaster, Chancellor Angela Merkel called for the shutdown of the country’s nuclear power plants.
    • The utility companies have lost billions through the fall in the wholesale electricity price and the value of their operations.
  • Audio

    Audio

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A German court today will begin hearing a case brought by the nation’s three largest utilities that could ultimately force taxpayers to foot the €19 billion ($21 billion) bill for shutting down the nation’s nuclear power plants.

The Federal Constitutional Court in Karlsruhe will hear from representatives of utilities E.ON, RWE and Vattenfall in what is likely to be a precedent-setting case over paying for the costs of Germany’s shift to renewable energy.

After Japan’s Fukushima disaster in March 2011, the German government ordered the shutdown of all 25 nuclear power plants in the country. Eight nuclear plants were quickly switched off; the last 17 are to be shut by 2022.

The government’s decision to switch to clean energy and the subsidies it paid for renewables such as solar and wind led to a glut of electricity on the German market, causing the wholesale price of electricity to plunge by half.

Since Fukushima, RWE’s share price has plunged by 77 percent and E.ON’s share price by 63 percent, the the utilities have struggled under the electricity glut and the costs of retiring often-new power plants.

E.ON is Germany’s largest utility and RWE is the country’s No. 2. Vattenfall is owned by Sweden’s royal family and is Germany’s No. 3 power producer, with plants in Berlin and Hamburg.

The utilities want the German government — ultimately German taxpayers — to insulate them from the costs of the move toward renewable energy.

The lawsuit brought by the utilities claims that Germany’s switch to renewables was hasty, ill-planned and an infringement of their rights. The decision was taken by the German chancellor, Angela Merkel, in the days after the Fukushima disaster and quickly ratified by parliament.

“I’m happy the companies are suing the government and I hope they win.”

Jürgen Cebulla, Shareholder of RWE and E.ON

During the legal hearings, hundreds of managers and representatives from the federal and state governments are to testify.

The case is complex and judges will weigh public safety, property rights and the freedom to run a business. The German government will argue its decision to abandon nuclear energy was taken for the good of the people, but the big legal question will be whether utilities are entitled to compensation.

The case is likely to take several months before a ruling is issued. The court’s decision will be final and will provide a basis for utilities to sue for damages.

 

132 Eon utility E.ON - WTB 2015 Neu 2016-03-11-01

 

“I expect justice,” Johannes Teyssen, the chief executive of E.ON, said last week.

As he entered the court today, Mr. Teyssen said: “I have great faith in Germany’s highest court.” He added that the company had invested billions in nuclear technology.

If the utilities win, the companies may sue for €19 billion, or $21 billion, in damages, according to industry sources.

According to Reuters, E.ON is suing for €8 billion but RWE has not yet stated the size of its claims. Deutsche Bank estimates RWE’s claims could reach €6 billion. Vattenfall has also filed a lawsuit with the Washington-based International Center for Settlement of Investment Disputes, calling for €4.7 billion in damages.

The companies are obliged to sue on behalf of their shareholders, who could otherwise take legal action against them.

“I’m happy the companies are suing the government and I hope they win,” said Jürgen Cebulla, a pensioner and shareholder. “I have shares in both E.ON and RWE and they have lost 75 percent of their value since I bought them. The reason why I included them in my account was they pay a high dividend.”

He noted that utilities used to be known as safe shares for widows and orphans and pensioners.

“You didn’t expect the share price to go up much but you also didn’t expect it to fall as much as it has,” he said.

“I’m not against wind and solar energy, but you have to plan a change like that,” Mr. Cebulla said. He called Germany’s decision to transition to renewables “a very abrupt change for political reasons. I’m sure it was illegal.”

Erkan Aycicek, an analyst at LBBW, a state-backed bank in Stuttgart, was reluctant to predict the court’s decision but said he didn’t think the capital markets expected compensation to be paid.

Barbara Hendricks, Germany’s environment minister, said today she was was confident that utilities would not win the court battle.

“We as the government believe that our legal position will prevail,” she told Reuters.

In court on Tuesday, Mr. Teyssen mounted strong criticism of the decision to abandon nuclear power. “Despite the declaration that there would be no problems for German nuclear power plants, what happened was all the costs were transferred to the company’s investors,” he said and called for “fair compensation.”

Furthermore, he said, the departure from nuclear energy had also had negative consequences for the environment. “Nuclear energy, which doesn’t emit carbon dioxide, was replaced by renewable energies, but coal stayed.”

The environment minister Ms. Hendricks launched a counter attack. “The utilities are painting a picture suggesting that Germany will have to import electricity in the future, that we won’t be able to keep to our climate targets and that electricity prices will be sky high in the future. None of that has happened,” she said. She defended the government’s decision to abandon nuclear power.

“Fukushima meant in Germany we had to reevaluate nuclear power,” she said. “The legislator’s decision was and is right.” Given the controversy over nuclear power that had raged for decades, it wasn’t possible just to continue as usual, she said. Ms. Hendricks said that the government couldn’t be linked for ever to agreements with energy providers and that she saw the suit as unlawful and ungrounded.

The court’s decision may affect the work of a government commission that is deciding how to distribute the costs of winding down nuclear power plants and disposing radioactive waste.

The energy companies have already lost billions.

E.ON lost €7 billion in 2015 and RWE lost €170 million. Both companies are restructuring to adjust to the new market landscape, with plans to separate their businesses into renewables and traditional power units.

 

144 RWE - WTB 2015 Neu 2016-03-11-01

 

Allison Williams is deputy editor in chief of Handelsblatt Global Edition. Jürgen Flauger and Franz Hubrik contributed to this report. To contact the author: williams@handelsblatt.com

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