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* Utilities to pay 23.6 bln euros into fund for waste storage
* Agreement removes liability for nuclear waste
* Law expected to come into force in early 2017 (Adds details, comments)
BERLIN, Oct 19 (Reuters) - The German cabinet approved a draft law on Wednesday for top utilities to start paying into a 23.6-billion-euro ($25.9 billion) fund next year in return for shifting liability for nuclear waste storage to the government.
The agreement removes uncertainty about the costs of storing waste and gives investors greater clarity over the future finances of utilities E.ON, RWE, EnBW and Vattenfall.
The utilities will remain responsible for dismantling Germany's nuclear plants, the last of which will be shut down in 2022 as part of country's abandonment of nuclear power, a decision triggered by Japan's Fukushima disaster five years ago.
E.ON and RWE welcomed the cabinet's decision.
"With this the company sees a chance to bring to an end a controversial topic that has been discussed for decades," E.ON said in a statement.
RWE and Vattenfall urged the government to finalise a contract with the utilities to ensure long-term legal certainty.
Shares in E.ON and RWE were little changed on Wednesday, having rallied sharply on Friday when final details of the draft law were first reported by Reuters.
With a combined liability of some 16.7 billion euros, E.ON and RWE will be responsible for raising most of the funds. E.ON has said it might carry out a share sale to raise about 2 billion euros.
Environment group BUND criticised the deal, saying the taxpayer must now bear "enormous financial risks" in case the costs of storage rise.
Under the deal, companies can transfer the funds in one lump sum on Jan. 1, 2017, or in several instalments over the next decade.
If utilities opt to pay in stages, their first payment must be at least a fifth of the total. They will have to pay interest of 4.58 percent per year on the remaining amount, providing an incentive to pay as much as possible up front.
Utilities that decide to pay in instalments will also have to provide collateral for what they still owe, which could be done via a bank guarantee, according to details of the draft law.
Vattenfall said some questions still needed to be answered on removing the operators' liability once payment into the fund has been made.
The draft law must be debated by the lower and upper houses of parliament and is expected to come into force at the start of February, 2017.
$1 = 0.9103 euros Reporting by Markus Wacket and Caroline Copley; Additional reporting by Tom Kaeckenhoff in Duesseldorf and Vera Eckert in Frankfurt; Editing by Joseph Nasr and Jason Neely