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* Length of extensions 12 years on average, says minister
* Older plants to see 8-year extension, newer plants 14
* Nuclear power plants most profitable large power plants
* E.ON's share price climbs 3 pct, RWE's rises 2 pct
* E.ON, RWE decline to comment on effects to their business
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By Christoph Steitz and Peter Dinkloh
FRANKFURT, Sept 6 Shares in Germany's utilities E.ON (EONGn.DE) and RWE (RWEG.DE) climbed on hopes for billions of euros of extra profits from a decision to extend the lifespans of nuclear power plants in Europe's biggest economy. Late on Sunday, Chancellor Angela Merkel's ruling coalition agreed that the 17 nuclear power plants operating in Germany would get approval to operate longer depending on their age, giving each power plant an average extension of about 12 years. [ID:nLDE6840EZ]
Nuclear power stations are the most profitable large-scale power plants once building costs are paid off, as the fuel is cheaper than fossil fuels, companies don't need carbon certificates and don't have to fully insure them. "Our first reaction is positive because the extension is longer than we expected," said Merck Finck analyst Theo Kitz.
DZ bank analyst Mario Kristl said the government is also siphoning off fewer profits from the utilities than expected.
E.ON shares rose 3.1 percent to 23.63 euros by 0903 GMT, while RWE was up 2.4 percent at 54.53 euros, more than the 0.3 percent increase of the German bluechip index DAX .GDAXI and 1.2 percent advance of the Stoxx 600 Europe Utilities index .SX6P.
Spokesmen for E.ON and RWE, two of the world's largest utilities, declined to comment. RWE said it would have to study the details of the decision before it could comment on the consequences for the business.
In August, prior to Sunday's announcement, E.ON had said a proposed nuclear fuel tax to accompany the extension plans would cut its adjusted earnings before interest and taxes (EBIT) by an estimated 1.3 billion euros to 1.5 billion euros ($1.7 - $2 billion) a year.
RWE had said it might invest less in power stations and grids because of the possible tax and had to review its medium-term profit expectations up to and including 2013.
But the legislation might run into trouble if Germany's upper house, the Bundesrat, has to agree to it as the government coalition of the Merkel's Christian Democrats (CDU) and the Liberal Democrats (FDP) does not hold a majority there.
Merkel said she was confident the plans would not need approval of the upper house of parliament. [ID:nBAT005653]
The "compromise seems to be a tic better but a lot remains unclear," analysts from WestLB said.
Economy Minster Rainer Bruederle and Environment Minister Norbert Roettgen plan to hold a press conference at 0900 GMT.
Nuclear provided 23 percent of the power generated in Germany in 2009, unchanged from 2008, according to information from the energy industry association BDEW. (Editing by Sharon Lindores) ($1=.7453 Euro)