FRANKFURT/MUNICH German Chancellor Angela Merkel said she was confident a law extending the lives of nuclear power reactors could be passed without backing from the upper house of parliament, setting up a clash with opposition parties.
Merkel's center-right ruling coalition ended months of division on Sunday by agreeing the country's 17 nuclear power plants should operate longer than planned, giving each reactor an average extension of about 12 years.
The deal, welcomed by utilities, came ahead of an energy plan due from the government this month, and addressed concerns in the coalition and industry over the fate of the plants, the last of which was due to shut by 2021.
"I am in good spirits that it would stand up against potential lawsuits," Merkel told a news conference on Monday. "We believe we can get this into law without (upper house) approval."
Not all laws need to be passed by the Bundesrat upper house, which represents the 16 federal states, and legal opinion is divided on whether the extension requires its approval.
Those who say a law on the extension does not need Bundesrat approval say it was not consulted when the phase out was first approved.
Shares in utilities E.ON closed up 1.8 percent at 23.34 euros, RWE ended up 1.8 percent at 54.21 and EnBW rose 4.9 percent to 37.70. Unlisted Swedish firm Vattenfall was the fourth large utility affected by the decision.
The opposition Social Democrats (SPD) and the Greens immediately said they planned a legal challenge to Merkel's attempts to sidestep the upper house which Merkel's coalition controlled until a regional election defeat in May.
The German public strongly opposes building new nuclear power plants and there is a major protest planned for September 18 against the plan to extend their operating lifespan.
Franz Juergen Saecker, a legal expert from the Berlin Institute for Energy and Regulatory law, said Germany's highest court, the Federal Constitutional Court, had voted on similar matters on three previous occasions.
"From these decisions we can extrapolate that a simple extension of the life spans doesn't need to be approved by the Bundesrat," Saecker told Reuters.
The SPD and Greens have vowed to scrap any nuclear extension passed if they return to power in the next election, set for 2013. They are currently ahead of the center-right parties in opinion polls.
Nuclear power accounted for about 23 percent of the power generated in Germany in 2009, unchanged from 2008, according to information from energy industry association BDEW.
Nuclear power stations are the most profitable large-scale plants after building costs are paid off, as the fuel is cheaper than fossil fuels and utilities do not need carbon certificates.
More than half of Germans surveyed consistently oppose extending the reactors' life spans, opinion polls show. They are against the extensions due to memories of the 1986 Chernobyl disaster, and concerns over nuclear security and waste storage.
To sweeten the deal, the government said it would raise some 30 billion euros ($38.62 billion) from utilities in the years ahead, which would be used to cut budget deficits and to expand renewable energy.
Some groups were skeptical of the plan, saying the nuclear lobby was powerful.
"The nuclear lobby has successfully put through its bold demands," Dietmar Schuetz, president of German renewable energy agency BEE, said in a statement. "This means that the government's energy concept becomes a farce."
Volker Wasgindt, spokesman for SMA Solar, Germany's biggest solar company by market value, said he was concerned about the effects the extension would have on renewable energy.
"In our view, the extension of life spans for nuclear plants puts a damper on the expansion of renewable energy," Wasgindt said.
In August, E.ON had warned a nuclear fuel tax to accompany the extension plans would cut its adjusted earnings before interest and taxes by up to 1.5 billion euros a year.
E.ON welcomed the government's move but said the average lifespan extension of 12 years still meant it would be hard for renewables to bridge the gap when the reactors go off-line.
The announcement was a "political decision" which operators had to accept, CEO Johannes Teyssen said.
RWE CEO Juergen Grossmann said although nuclear power now had a longer future, the deal was not perfect.
"We as operators are now facing considerable and unexpectedly high financial burdens," he said.
In the run-up to the agreement, 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.
Still, market analysts were upbeat about the agreement.
"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.
European Union energy commissioner Guenther Oettinger welcomed the move, saying plans to grant nuclear plants longer life spans tied in with the bloc's energy plans.
A law to phase out the plants took effect in 2002, passed by the SPD an Greens under ex-Chancellor Gerhard Schroeder.
(Writing by Annika Breidthardt; Additional reporting by Christoph Steitz in Frankfurt, Hans-Edzard Busemann, Anneli Palmen in Duesseldorf, and Erik Kirschbaum in Berlin; Editing by Karen Foster)
($1 = 0.7768 euro)