Merkel Says E.ON, RWE Face Triple Charges for Nuclear Extension

German utilities E.ON AG and RWE AG, two of the worst-performing members of the benchmark DAX index, face a triple whammy of costs tied to a reprieve for nuclear power of as little as 10 years, Chancellor Angela Merkel said.

Merkel, in her first comments since the government received a report on energy strategy last week, said the scenarios show an extension of atomic plants’ operating lives of 10-15 years “is sensible from a technical point of view.” Plant safety, the “overriding principle of nuclear power,” still needs to be factored in, she said in an interview with ARD television.

Utilities will also have to make a “contribution” to help promote renewable energy, a levy that still must be negotiated with utilities, Merkel said in the interview in Berlin, broadcast late yesterday. Along with safety improvements, the costs would add to a 2.3 billion-euro ($2.9 billion) annual tax from 2011 that utilities oppose.

“Dust gradually settles, with Merkel confirming her sympathy for a 10- to 15-year lifetime extension,” Michael Schaefer, an analyst at Equinet AG, said in a report published this morning. The “weekend’s news may be taken positively by the market,” said Schaefer, who has an “accumulate” recommendation for RWE shares, and a “hold” on E.ON stock.

Showdown

E.ON, Germany’s biggest utility, rose as much as 2.4 percent to 22.86 euros in Frankfurt trading. The shares were up 0.9 percent as of 1:17 p.m. local time, trimming the stock’s decline this year to 23 percent. Essen, Germany-based RWE gained 0.3 percent and has also fallen 23 percent in 2010. Of the 30 DAX companies, only HeidelbergCement AG has performed worse.

Merkel, whose Cabinet will discuss the nuclear tax on Sept. 1, is facing down German industry, banks and the utilities as she crafts an energy policy for Europe’s biggest economy by the end of September. E.ON and RWE, Germany’s biggest utilities, have threatened to close nuclear plants early if the tax goes ahead, and said they favor a minimum 15-year extension.

It’s “desirable” to extend the use of nuclear power as a “bridge technology” toward greater use of renewable energy, Merkel said. As a result, “as far as I’m concerned, there should -- and there must -- be such a contribution” to renewable energies.

The government-commissioned report by the EWI Institute and Prognos AG, delivered to ministers on Aug. 27 and not made public, recommends prolonging the use of atomic energy by between 12 years and 20 years, Der Spiegel magazine reported in this week’s issue.

Cost for Owners

Environment Minister Norbert Roettgen said nuclear-plant owners will have to spend almost 50 billion euros to improve safety in the event of an extension of 28 years, Handelsblatt newspaper reported in an advance copy of an article in today’s edition. That sum would drop to 6.2 billion euros for a four- year reprieve, it said.

Germany’s four biggest energy companies, which include EnBW Energie Baden-Wuerttemberg AG and Vattenfall AB, may reap about 6.4 billion euros for each year they run atomic plants longer, according to a July 29 report by the DIW institute.

Merkel’s second-term government came to power in October on a platform of overturning the planned phase-out of Germany’s 17 nuclear power plants by about 2022, backed by a previous administration. Since then, her coalition with the Free Democrats has tumbled to historic lows in opinion polls amid splits over tax cuts, solar subsidies and health care.

An extension of nuclear power, which polls show the public opposes, faces further coalition division over energy policy, with senior members of Merkel’s Christian Democratic Union including Michael Fuchs, the CDU’s deputy floor leader in parliament, who favors a reprieve of at least 20 years.

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.