Once swimming in money, German energy companies are now gasping for breath and can no longer rely on old business models. Developments in technology and past mistakes have cost them dearly.
EON, RWE, EnBW and Vattenfall are the four companies that dominate the German energy market. But Germany's planned nuclear phase-out has taken a toll on their balance sheets. On Wednesday, EON, Germany's biggest gas and electrical company, announced losses of more than 2 billion euros ($2.6 billion) - the first losses in the company's history. EnBW was also in the red last year, while RWE and Vattenfall recorded profits.
But the nuclear phase-out has not come as suddenly as the companies claim.
In 2000, Germany's then ruling red-green coalition had first reached an agreement with utilities to shutting down nuclear power in the long term.
Christian Held, an energy lawyer with the legal firm, BBH, says the energy companies have had enough time to focus on new business models. BBH is considered one of the biggest firms specializing in energy, but it does not advise the four energy companies in this report.
"My impression is that the big energy companies thought the phase-out would be reversed and that the lifespan of plants would be extended," Held said.
Relying on their own strength
And in 2010, the current government under Chancellor Angela Merkel did indeed reverse the red-green coalition's deal and extend the lifespan of German nuclear power plants. But after the 2011 Japanese earthquake and tsunami, and the resulting meltdown at the Fukushima power plant, the decision was reversed again.
Now, only nine out of 17 nuclear power plants in Germany remain online and operational. EON reports that the shutdown of two plants alone cost it 2.5 billion euros.
According to Greens Party parliamentarian, Oliver Krischer, the big energy utilities had ignored that the world was changing for too long. Krischer says EON's losses were the result of misguided energy policy.
"It is the logical consequence of an outdated business model that relies on environmentally damaging coal and dangerous nuclear power plants," Krischer said.
Suddenly seeing green
The utilities see things differently.
RWE chief executive officer, Arnd Neuhaus, told DW that his company had invested in renewable energy and new, decentralized networks for years. And EON's chief, Johannes Teyssen, also described a similar policy in his company's latest annual briefing to investors.
"As in previous years, we will invest 7 billion euros in developing renewable energy over the next five years - of which more than 2 billion euros will go to the large offshore wind parks in the North and Baltic Seas," Teyssen said.
To critics, statements such as these read as though the big energy firms are desperately trying to prove they have not being sleeping on the job.
"Admittedly, the big companies like EON and RWE have started to spend significant sums of money on renewable energy," said energy lawyer, Held. "But renewable energy still only accounts for a small percentage of their total output."
Their dependence on conventional, centralized power plants could also prove to be a disadvantage.
Uwe Leprich, head of the Institute for Future Energy Systems in Saarbrücken says smaller, decentralized power plants and private means of energy production, such as solar panels on houses, will play an important role in the future.
"The middle class is becoming much more economical with its energy usage," Leprich told DW.
The lawyer, Christian Held, agrees that smaller producers of renewable energy will start to play a larger role. But he does not see the big energy companies losing out completely.
"There will be a pluralistic energy economy," he said. "We will need substantial gas-fired power plants."
Gas-fired power plants can compensate for fluctuations in the supply of renewable energy by storing surplus energy until it is needed.
And Held believes the big companies will still run the energy networks of the future.
But responding to pressure from the European Union, which wants to encourage competition, EON, RWE and Vattenfall have already shed their high-voltage networks and sold them to other suppliers.
New business models
So, German energy companies are looking for new business models - but some may leave Germany behind.
"Above all, we see opportunities for growth outside of Europe," EON's Johannes Teyssen wrote in his annual briefing.
Teyssen cited examples such as wind farms in North America, gas-fired power plants in Russia, and a stronger engagement in Brazil. That said, EON still needs to cut its costs and plans to slash 11,000 jobs worldwide.
The big energy companies will likely have to come to terms with their wielding less power in future and making less money.
"Regarding their core activities - the production of electricity in coal and nuclear power plants - all they can do now is manage the decline," said Held. "Because of the change in policy, their current kind of business will not be a business in the future."
Author: Andreas Becker/srs
Editor: Zulfikar Abbany