Liability change

Power Firms Can't Escape Nuclear Fallout

Brokdorf power station Source Thomas Raupach
Old nuclear power plants just got a whole lot more expensive for some power firms.
  • Why it matters

    Why it matters

    Germany is phasing out nuclear power but the cost of its atomic legacy is largely unknown, and could multiply many times.

  • Facts

    Facts

    • The proposed law would expand liability of the big power companies – E.ON, RWE, EnBW and Vattenfall.
    • Vattenfall AB, the Swedish parent of the German subsidiary Vattenfall, changed its legal structure in 2012 to cut off liability within Germany.
    • Under current law, E.ON is only liable for five years if reserves for dismantling nuclear plants are insufficient.
  • Audio

    Audio

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The German government is planning to change the law to ensure power companies can’t duck out of paying for the safe dismantling of nuclear reactors and disposal of radioactive waste, according to a draft bill obtained by Handelsblatt.

The proposal for “independent additional liability under nuclear law” is expected to be approved by the German cabinet on September 23. It will prevent utilities from restructuring old companies and subsidiaries to avoid responsibility for decommissioning.

Germany decided after the Fukushima disaster in 2011 to fully phase out nuclear and fossil-fuel plants and move to renewable energies. But the issue of funding for the decommissioning of reactors and storing waste has not yet been settled – and for months has caused friction between the political establishment and the energy industry.

Doubts have been raised over whether the four big power companies – E.ON, RWE, EnBW and Vattenfall – could come up with the required reserves of €39 billion, or about $44 billion. There are also questions of whether it would be enough.

The proposed legislation is supposed to make sure “that assets of the entire company, one part of which are the operating companies, can be accessed to cover the costs of disposing of nuclear waste,” according to the Ministry for Economic Affairs. The additional liability is based on the fact “that an operating company is controlled by a parent company.”

The goal of the proposed law is “to guarantee long-term corporate liability for disposing of nuclear waste, and reducing risks to the public budget.”

This control could consist of the fact “that a majority of shares or voting rights in the operating company is held by the parent.” In that case, the parent company – and thereby the entire firm – is liable under nuclear law for obligations of the operating company.

The ministry asserted in an explanatory paper that if control of the operating company by the parent comes to an end, for example through restructuring, the additional liability continues. “Thus a company cannot withdraw parts of its assets from additional liability.”

The legislative draft explains that the intention is to guarantee that liability is retained. At the moment, the applicable law “fundamentally allows both restructuring and cancellation of contracts establishing control and regulating the transfer of revenues.”

The goal of the proposed law is “to guarantee long-term corporate liability for disposing of nuclear waste, and reducing risks to the public budget.”

In other words, even if the connection of the operating company to the parent has been severed – and there is no contract regulating the transfer of profits – the parent company can be held liable.

The ministry said the proposed law defines Vattenfall AB, the Swedish parent of the German subsidiary Vattenfall, as a “controlling company.” That means Vattenfall AB would be considered fully liable for its German nuclear legacy. In 2012, the company altered its structure in a fully legal manner so that its liability ends within Germany. Access to the Swedish controlling company is no longer possible without the new law.

The new law is also aimed at the German utility E.ON, which last year announced it would split itself into two companies. One would be called Uniper, for nuclear and fossil fuel plants that will be phased out, and furnished with reserves of some €16 billion. E.ON itself would focus on renewable energies, networks and customer-oriented activities.

If the reserves for dismantling of nuclear plants and storing waste are insufficient, E.ON would initially be liable. That liability, however, ends after five years.

The Ministry for Economic Affairs wants to change that with the new law. E.ON, however, said the law was not needed and that it has set aside enough money to pay for nuclear plant demolition, cleanup and storage.

On Wednesday, the power company said it would challenge the proposed law as unconstitutional. If the plans become law, “we will most likely be compelled to seek redress by legal means.”

The Ministry for Economic Affairs has commissioned Warth and Klein auditors to evaluate the power companies’ reserves with a stress test, and the results will be published soon.

The utilities have already been provided with interim results. The word from company circles is that, for the most part, they agree with the auditor’s evaluations.

 

Klaus Stratmann writes about politics and the energy industry in Berlin. To contact the author: stratmann@handelsblatt.com

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