* Industry suspends projects as minister plans price caps
* Munich utility says may spend money abroad
* Investors, advisers criticise uncertainty
By Vera Eckert and Christoph Steitz
FRANKFURT, March 4 Germany's plan to curb rising
energy costs for consumers before a September election may
backfire if it scares off the investors desperately needed to
fund an ambitious shift from nuclear to renewable energy.
Chancellor Angela Merkel's 550-billion euro ($714 billion)
energy shift, dubbed "Energiewende", was unveiled nearly two
years ago after Japan's Fukushima disaster and depends on the
financial firepower of pension funds, infrastructure investors
and utilities, including the likes of Allianz, Munich
Re, E.ON and RWE.
But they are taking fright at Environment Minister Peter
Altmaier's plan, presented in January, to curb consumer energy
prices, in part by lowering support payments for power produced
by new wind and solar power installations.
Investors buy solar and wind parks to benefit from
state-guaranteed returns on the power produced, so-called
feed-in tariffs, creating a stable investment opportunity that
has made Germany the world's largest market for solar power.
The proposal, which Altmaier has promised to turn into law
before the federal vote, has been cheered by the public, but
comes with a catch.
Capping subsidy increases to renewable power producers for
two years and allowing subsidies for new installations to be
suspended risks destroying a big incentive for investors.
In the end, the proposals may be watered down. But the
negative signals they have already sent to the industry have led
some players to rethink their commitment to renewables.
Stadtwerke Munich (SWM), the utility that delivers power to
the 1.3 million inhabitants of the Bavarian capital, has said
the plan creates uncertain conditions and regulatory chaos.
"(Altmaier's plan) breaks taboos as it retroactively changes
laws that were the basis for SWM's entire planning and
investment decisions in renewables," Florian Bieberbach,
chairman of SWM's board, said last month.
As a wealthy municipal utility, SWM has committed itself to
no less than 9 billion euros of renewable investments up to
2025. Bieberbach said while SWM would hold on to the sum, it
would seek to identify alternative sites in other countries.
A SAFE PLACE TO INVEST?
Munich is not alone. Germany's utilities, on the front line
of the battle to exit nuclear and ramp up renewables, are also
worried about the message Altmaier's plan sends.
"The new package of measures damages the expansion of
renewables as well as Germany's image as a safe place to
invest," Germany's number three utility EnBW said in
an internal document seen by Reuters.
Surcharges under the existing structure for feed-in tariffs,
a major component of the power price borne by consumers, are
calculated once a year and jumped 40 percent last October,
causing an outcry.
The surcharges are levied on consumers to fund the switch to
renewables and away from fossil fuels. They have accelerated
sharply as more new installations than expected have been built.
The bill for supporting renewables rose to 20 billion euros
in 2012 from 17.1 billion in 2011 and if the system remains
unchanged, another huge increase is looming.
Criticism has also come from the financial sector, a vital
player in the financing of the renewable shift.
Until now, investors were willing to forego high returns
because they could count on a reliable stream of income from
renewable units and new networks. But this is changing.
"Large investments in offshore wind parks can only be made
if returns are sufficiently reliable and known," said Willi
Mannheims, board member at buyout firm VMCap.
"Changes, such as the power price break, are leading to
uncertainty, scaring off investors as long as the consequences
are not entirely clear."
Advisers to utility companies and other investors bristle at
what they see as a hasty move by Altmaier to get a grip on
consumer prices before the election.
"Our clients depend on long planning and execution times,"
said Christian Marthol, a partner at law firm Roedl & Partner.
"They have reacted very defensively to the Altmaier paper."
"Intended projects such as wind farms or biomass plants are
being put on ice in no time as the plan has created a lot of
($1 = 0.7702 euros)
(Additional reporting by Markus Wacket in Berlin and Arno
Schuetze in Frankfurt; Editing by Noah Barkin and Helen