Analyst View: Germany's nuclear exit plan
FRANKFURT (Reuters) - Germany will shut all its nuclear reactors by 2022, parties in Chancellor Angela Merkel's coalition government agreed on Monday in a reaction to Japan's Fukushima disaster that marks a drastic policy reversal.
Following are comments from analysts and traders:
KEVIN LYNE-SMITH, HEAD OF EQUITY RESEARCH EUROPE & NORTH AMERICA, CREDIT SUISSE
"The cut of life-time extension and the level of taxation combined looks a bit as if nuclear utilities are being penalised. It will have a short-term impact on earnings and possibly on dividends that may be trimmed further. I would be very surprised if they did not seek a way for legal redress."
SEBASTIAN ZANK, ANALYST, SILVIA QUANDT RESEARCH
"Although it has been rumored for quite a while that the extension of the life span of German nuclear power plants will be revised again, the outcome of the final exit from nuclear power comes to the detriment of German utilities E.ON and RWE.
"In light of the financial burden coming from the nuclear fuel tax without the additional cash flows beyond 2022, it is expected to be seen negatively by the market. We expect sentiment for German utilities to remain poor for the time being. Given the mismatch of the abolishment of the extension of nuclear power plants' life spans on the one hand and the continuation of the nuclear fuel tax on the other hand we expect the two utilities to perform weakly today."
MARKUS HUBER, SENIOR TRADER AND HEAD OF GERMAN SALES AND TRADING, ETX CAPITAL
"The main thing that is weighing on utilities today is the government decision to retain the tax, which was expected to raise 2.3 billion euros a year from this year. In earlier weeks there had been speculation that supported the shares that the tax may be scrapped if the utilities had been prepared to invest in alternative energy. On the other hand though, eleven years to 2022 in a long time and the question I'm asking is whether the exit will really take place then."
MICHAEL SCHAEFER, ANALYST, EQUINET BANK
"Some optimists may have hoped for the abolishment of the nuclear fuel tax. This may be taken initially negative by the market. Ahead of further financial details and voting from upper house we stick to our cautious view on German utilities."
BERNHARD JEGGLE, ANALYST, LBBW
"The agreement of the CDU/FDP coalition is considered to be a decisive preliminary decision before the scheduled final cabinet decision on 6 June 2011."
"The decision to stick to the tax on fuel rods will trigger a negative share price reaction today, as parts of the market have anticipated a scrapping of the tax, as rumors suggested this approach last week. The decision for an exit in 2022 should be in line with market estimates. Subject to the further details, we will have to cut our estimates for both E.ON and RWE."
MARC NETTELBECK, ANALYST, DZ BANK
"We expect that the companies (RWE and E.ON) will have to adjust their guidance, including the dividend, for full-year 2011 and probably the years thereafter, because so far both companies assumed that the stopped nuclear power plants will be back on line after the moratorium. Even though the companies indicated that the three-month moratorium could be counterbalanced by better performances in other segments, we doubt that this additional burden could be compensated."
($1 = 0.6982 euro)
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