E.ON’s Johannes Teyssen had a turbulent year in 2015 as he wrestled Germany’s biggest utility into an organization fit for a country changing to renewable energy sources.
Mr. Teyssen started the year by spinning off half of his business and creating a new subsidy, Uniper, which operates E.ON’s old coal-fired, hydroelectric and gas-fired power plants. But more change is ahead as he winds down traditional power generation.
Mr. Teyssen, who originally trained as a lawyer, took on the top post at E.ON in 1989. The company has since lost billions as subsidies for renewables led to a fall in wholesale electricity prices.
DIE ZEIT: Mr. Teyssen, you’ve lost so much weight that you’re almost unrecognizable. How did you do it?
Johannes Teyssen: It’s a diet called the Metabolic Balance. What’s most important is that you reduce your consumption of carbohydrates, drink three or four liters of water a day and exercise a lot. The first four weeks were really tough. I was bringing my meals with me to meetings in Tupperware containers.
What did you do differently?
I once weighed 127 kilograms (280 lbs), and now I weigh 95. I had to completely change my entire wardrobe twice. I now jog seven kilometers (4.3 miles) four times a week, which is something I never thought I’d be able to do again. I recently even played with my kids and climbed a tree. I’ve lost enough weight now though and I feel good. But that’s enough about me.
Not entirely. Your company split up on January 1, into the new E.ON, which mainly sells green electricity, and Uniper, which focuses on power generation from fossil fuel sources like coal and natural gas. Is it a coincidence that both you and E.ON have undergone a renewal?
I always said: If E.ON splits, then I’ll have to split as well.
You used to look more like a typical old-style German manager, when you were heavier and wore a dark suit and tie. Now you dress more casually and you’re head of Germany’s largest green electricity provider, the new E.ON.
You think that’s strange, don’t you?
Yes. You fought for the preservation of nuclear power for a long time. Ten years ago, would you have expected to become head of a company that produces clean power?
No. If someone had told me that, I would have said they were crazy.
What led to your change of heart?
In 2014, my fellow board members and I spent a lot of time traveling around the world, because we wanted to understand whether the Energiewende [Germany’s phase-out of nuclear power and shift toward renewable energy] is the product of Germany’s politicians or if there is a fundamental shift and the energy industry has to change. In that time, we learned that in many countries people who use and produce energy are undergoing a change of consciousness. This shift is driving a global Energiewende.
What exactly does that mean?
The energy sector is currently splitting into two worlds. The one world will still depend on the old system for decades, relying on established structures like centralized, large power plants, which supply power to factories which use a lot of energy. In the other world, renewable energy source and information technology enable users to produce and market energy themselves, be it with solar energy or household cogeneration units.
What does that mean for E.ON?
We asked ourselves whether we’re on the side of the old system, which is still needed? Or are we part of a radical switch to new energy? If you operate in both worlds, you run the risk of constantly having compromise, because the two areas overlap repeatedly. You can only invest each euro once – in a gas-fired power plant or an offshore wind farm, for example. With the classic energy world on one side and the new energy world on the other, I worried that our company would end up being nothing but average in every respect. That’s what led to the split.
The divestment movement is currently putting a lot of pressure on mutual funds, insurance companies and other large investors worldwide to pull out money from coal companies and technologies that are harmful to the climate. Did pressure from investors play a role in E.ON’s change of course?
Divestment was not what motivated me. This movement affects only a very small portion of the sums of money being moved around worldwide. Far more investors are completely agnostic on environment issues, they’re only interested in the returns of the different business models.
What do the business models of your two companies look like now?
The new E.ON, which I run, makes money with renewable energy, networks and the sale of energy products. With renewables, we’re experiencing a steep learning curve with significantly falling costs. The network business is regulated by the government and therefore relatively stable, and in sales we are making money with a low capital investment. Our spinoff Uniper, on the other hand, will continue to operate large power plants for decades to come. Its costs are much higher and it takes a lot longer to recoup the investment. Uniper is also one of the leading companies in the international energy trading business.
Which model do you like better?
It doesn’t really matter. For the two businesses, you find different investors with different yield expectations. Often, integrated groups with different business models are confusing for investors.
Uniper bundles coal and gas-fired power plants, hydroelectric power and the trade in natural gas and gas storage. Do you think investors can get a handle on this mixed bag?
Have you ever been inside a power plant? Usually, it contains a steam-driven power generator. Whether the steam is generated by splitting atoms, burning coal or gas, or channeling water through turbines is irrelevant. Uniper doesn’t market atoms, coal or water, but electricity, which is a completely homogeneous product.
But lawmakers regulate the individual technologies in completely different ways. Why should investors buy into such an unpredictable business?
Let me ask you this: What would the world look like without Uniper? The company owns some of Europe’s largest natural gas storage facilities. Without them, it would be dark and cold here. Even at the new E.ON, we’re dependent on Uniper’s output and electricity. Of course, I don’t whether this will still be true in 50 years. All I know is that I myself will be in a final depository in 50 years (laughs).
You now run the new E.ON, Germany’s largest provider of green electricity. Among other things, you operate offshore wind turbines and solar fields. A single, average coal-fired power plant generates more electricity than all of these plants combined. Is this truly the league in which a company that was once Europe’s biggest energy provider wants to play?
We don’t have to define ourselves with the biggest possible numbers. I don’t have to own the most megawatts, or the largest wind turbines and the brightest solar panels. We want to offer our customers first-class products and make good money in the process.
You were once a vocal critic of subsidies for green electricity. Why did you struggle with renewables for so long?
I would repeat much of the criticism verbatim today. The current compensation for green power is based on the “invest and forget” principle: Everyone produces clean power – and it doesn’t matter whether it’s used or not – and is paid government-guaranteed prices for it. I’m critical of the fact that we are promoting renewable forms of energy in this unsustainable form. But things are changing. We will have to prove that renewables can perform independently and in an economically viable way. If not, the whole Energiewende will be a failure.
Do you buy green electricity now too?
I’m a customer of the E.ON brand, where “E stands for easy…”
A brand that offers green and non-green rates.
At the same time, I have three heat pumps in the yard, with which I produce some of the heat for my home. That’s enough for me.
E.ON recently reported a record loss, the stock price has hit rock bottom, and electricity prices have fallen by half since 2008. What makes you the right man to run the new, green E.ON?
I’m certainly a poster child for Damascene conversions. But I’ve also undergone a learning process. It was presumptuous of me to say that I was the perfect man to run the company. But the supervisory board chose me. Perhaps it was because I know a little about energy, networks and customer needs – and a little about management, too.
You have been working for the company for 26 years. How are your employees doing now?
Our employees – and me, too – are experiencing a roller coaster of emotions. Right now we’re undergoing a deep, painful transformation process. Sometimes, we’re anxious and worried, especially when we’re the target of political debates. On the other hand, there’s also a strong spirit of awakening. The new E.ON has more than 40,000 employees, and they don’t see their everyday work as torture, but are looking forward to change and constantly come up with new ideas. If you sugarcoat the new world for your employees, you know yourself that it isn’t true.
Let’s talk about your burdens from the past: Nuclear power plants.
(Sighing) I had actually planned to stop talking about nuclear power in this country at some point. That wish probably won’t come true.
Sorry. But you did include the nuclear power business in your new E.ON. How does it fit with clean electricity activities?
That’s a flaw prescribed for political reasons. We didn’t exactly ask for it. But in contrast to what some people suspect, our strategy was built with nuclear power in mind – and against it – we only have three nuclear power plants left. We see nuclear power as a non-strategic secondary business, one that will soon expire. We can guarantee that not a single kilowatt hour of electricity from nuclear power plants will be sold directly to our end customers. It’s strictly separated and sold in wholesale markets.
But where does this electricity eventually end up?
As long as nuclear power plants still produce electricity in Germany, it’ll still by part of the energy mix. You can’t tell how electrons were created by just looking at them.
Many politicians in Berlin suspect that by spinning off Uniper, you were trying to shirk your responsibility for winding down nuclear power plants and storing nuclear waste.
I never understood that assumption. We originally wanted to transfer the nuclear division to Uniper – along with about €16 billion to safeguard liability issues. For that, we would even have sold important areas at E.ON.
But the government still didn’t trust you. According to the planned new continuing liability law, E.ON was to remain liable for the costs of dismantling the nuclear division, which you wanted to spin off. No one knows exactly whether the reserves will be enough to dispose of the nuclear plants and the waste.
This may sound arrogant, but it doesn’t take much to know that you should be careful with guarantees. The government wanted us to be liable for up to 150 years, even though we spun off Uniper with €16 billion in assets. Under those conditions, the shareholders would never have approved the split. They would have asked me: What exactly are you smoking? That’s why we are now keeping the nuclear power division.
Are you disappointed by lawmakers?
I think the liability law was unnecessary and premature. Lawmakers defended it by saying parents are liable for their children. But then you have to ask: Who was at the birth? The Hamburg electric company (HEW) built Hamburg’s nuclear power plants, Brokdorf, Krümmel and Brunsbüttel. The City of Hamburg owned HEW at the time. The new rules are like a game of old maid. The person who happens to have the card in his hand, that is, owns a nuclear power plant that may have been built by others, is suddenly supposed to be solely liable. I don’t want to hide in the bushes. Energy suppliers do have responsibility for the nuclear power plants. Not alone, however, but together with the political world.
In the past, the heads of electric utilities were routinely invited to the Chancellery for energy summits. How has your relationship to the political world changed?
Perhaps the relationship between the energy business and lawmakers was never really healthy. It was too close for too long, too interwoven. And then there were phases in which the relationship was marked by suspicion and a lack of understanding.
Was it partly because E.ON managers were sometimes too arrogant?
I think there was a phase in which there was a certain hubris and arrogance in the energy economy toward lawmakers. A few years ago, E.ON was Germany’s most valuable company for a few weeks. At spot electricity prices of €80 ($87) per megawatt hour (compared to about €30 today), we couldn’t really run away from the money coming from investors. Some, perhaps including me, made the mistake of believing that it was because of our great performance.
So why were you so successful?
It was partly because of regulation. At the beginning of emissions trading in the European Union, corporations were given many CO2 certificates. Their market value was built into electricity prices, which meant that the certificates were earning money. There was nothing illegal about this, but it didn’t have much to do with our performance. Perhaps some politicians still resent that.
When did the relationship between lawmakers and the energy industry cool off to such an extent? In 2011, when Berlin had the seven oldest nuclear reactors shut down, in the wake of the Fukushima nuclear accident?
The enormous expansion of renewable energy had a much greater effect and that was before 2011. The oversupply of wind and solar electricity led to the sharp decline in electricity prices.
But after Fukushima, E.ON filed a constitutional complaint against the nuclear phase-out.
Yes, to protect E.ON’s shareholders. If we hadn’t done that, I could have been fired, and it would have been justifiable. I wasn’t questioning the nuclear phase-out. No one at E.ON wants to reverse that. But Article 14 of the German constitution states: Anyone who is expropriated for the good of the public is entitled to compensation. Our only objective was to be treated fairly by lawmakers.
Does Germany even need the new E.ON to make the Energiewende a success?
It’s enough for me if Germany becomes convinced that it’s more likely to succeed with E.ON.
This article originally appeared in Die Zeit. To contact the author: email@example.com