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German energy companies worry about their nuclear 'money machines'

Germany's four major energy companies have been ordered by the government to temporarily shut down seven nuclear power stations but don't intend to pull the plug permanently without a legal fight.

nuclear power plant Neckarwestheim

Nuclear power plants generate plenty of profits

Germany's four major energy companies RWE, E.ON, EnBW, and Vattenfall, which operate 17 nuclear power plants in the country, will lose a lucrative source of income if forced to close older plants permanently.

The plants are believed to be largely if not completely amortized. Their operating costs are, for the most part, easily manageable, including a tax on fuel rods and contributions to the country's renewable energy fund.

That means the longer the nuclear power stations stay online, the longer they generate profits. And those profits lumped together can easily amount to billions of euros. Lutz Mez of the Environmental Policy Research Centre at Berlin's Free University estimates that each of the older nuclear power plant generates a profit of about 1 million euros per day.

Resistance to be expected

Chancellor Angela Merkel's decision to shut down the seven oldest nuclear power plants for a period of at least three months essentially reduces the value of the big four energy companies' business. So it doesn't come as a surprise that the companies aren't happy with this decision. Only last fall, the German government revised a prior law that would have ended nuclear energy to extend the operating lifetime of the country's nuclear power plants.

RWE logo on skyscraper in Essen

A quarter of the energy produced by RWE is nuclear power

Should Merkel decide to permanently shut down Germany's nuclear power plants, E.ON may take legal action, according to German media reports.

Hans-Jürgen Papier, a former judge in Germany's highest constitutional court, called the government's three-month moratorium and closure of the seven nuclear power plants "unconstitutional." He said only courts can suspend a law, while parliament can change the law.

Kurt Beck, prime minister of the state of Rhineland-Palatinate, said he expected the energy companies to file damage claims.

The Süddeutsche Zeitung newspaper quoted Marco Cabras of the investors association DSW as saying that companies could base their claims on article 14 of the German constitution. This allows parties to claim damages if their private property rights are infringed. Cabras warned that companies could be sued for fraud by shareholders if they didn't take legal action.

Effects difficult to predict

Exactly how the order to shut down operations at the plants Biblis, Neckarwestheim, Brunsbüttel, Isar, Unterweser, and Philippsburg, will impact on the industry is hard to say. E.ON refuses to comment on the issue, saying only that it sticks to its profit forecast. For 2011, the company expects an adjusted net income of between 3.3 and 4 billion euros.

Hans-Juergen Papier, former judge at Germany's highest constitutional court

A former constitutional judge says the moratorium is unconstitutional

Of the power produced by E.ON, 50 percent is generated in nuclear power plants. Competitor RWE, by comparison, produces about 25 percent of its energy with nuclear power plants.

Wolfgang Pfaffenberger, a professor of economics at Jacobs University in Bremen, expects companies to lose up to 300 million euros in profits during the three-month moratorium, which the German government declared shortly after the Japanese nuclear disaster. But Pfaffenberger pointed to the possibility of the energy companies offsetting their losses by increasing operations in other power plants.

In addition to nuclear, Germany's four major energy companies own coal and gas power plants and are expanding into renewable energies.

Upgrading beyond cost-effectiveness?

Nuclear power accounts for almost a quarter of Germen energy production. Goal and gas power plants, which are currently not running at full capacity, could fill the gap left by the seven plants, according to the German Association of Energy and Water Industries.

On Friday Germany's public broadcaster ARD reported that the government intends to increase safety standards for nuclear power plants to an extent that would render them uneconomical. A spokesperson for the Federal Ministry for the Environment , however, declined to confirm a definite decision on increasing and upgrading safety measures.

In the past, the environment ministry had compiled suggestions for nuclear power plant upgrades that would have amounted to incurring costs of some 50 billion euros. For economical reasons, these upgrades were not implemented.

Author: Andrea Rönsberg, Insa Wrede
Editor: John Blau

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