RWE AG and EON SE dropped after the European Union’s highest court backed a German nuclear-fuel tax that has sparked a series of legal challenges by the country’s largest utilities.
The tax measures are in line with regulations on tax, state aid as well as the EU’s European Atomic Energy Community treaty, judges at the EU Court of Justice in Luxembourg ruled on Thursday.
The decision may affect pending challenges against the levy in Germany by RWE and EON. Companies previously won rulings in Hamburg and Munich, while a Stuttgart court cleared the tax. RWE dropped as much as 3.3 percent after the decision and EON declined as much as 2.4 percent in Frankfurt trading.
Germany’s unprecedented switch to renewables has forced traditional utilities to close nuclear reactors and seen power prices slide for a fourth year. The nuclear-fuel tax also contributed to harming the companies’ profitability from 2011. Essen-based RWE hasn’t ruled out following EON’s lead in breaking itself up, the most radical response yet to the changes.
The EU court said it rejected all arguments made against the tax, including that “a duty cannot be levied at the same time on the consumption of electricity and on the source from which that energy is produced.”
The ruling increases the legal security for about 7 billion euros ($8 billion) in estimated tax income in the period from 2011 through 2016, Eckhardt Rehberg, budget spokesman for the parliamentary group of Chancellor Angela Merkel’s Christian Union bloc, said Thursday.
“For final legal security we will have to await the proceedings before the Federal Constitutional Court and the Federal Finance Court,” Rehberg said by e-mail.
EON and RWE said in e-mailed statements they are now waiting for the German Constitutional Court’s decision. RWE still considers the tax unconstitutional, the company said.
Nuclear exit is at the core of other pending litigation in Germany and the country’s top court is reviewing whether related laws and the fuel tax are constitutional.
The ruling delivers a “good argument for a possible extension of the atomic tax until the end of operation for the last German nuclear power plant,” Environment Minister Barbara Hendricks said in a statement e-mailed by her ministry.
The EU court’s decision concerned more than 5 billion euros of nuclear-fuel levies. For EON, about 3 billion euros are at stake, of which Germany’s largest utility has paid more than 2 billion euros. Another 700 million euros are due this year and next.
RWE and Energie Baden-Wuerttemberg have paid 1.2 billion euros and 1.1 billion euros respectively and are due to pay another amount in the three-digit million euros each through next year, they said without specifying.
The EU court case is: C-5/14, Kernkraftwerke Lippe-Ems.