June 7, 2017 / 8:09 AM / 2 years ago

German utilities set for multi-billion euro windfall after nuclear tax ruling

FRANKFURT (Reuters) - Germany’s top court on Wednesday declared the country’s nuclear fuel tax to be illegal, a major victory for power firms now poised to reclaim about 6.3 billion euros ($7.1 billion) plus interest and ease the strain on their balance sheets.

General view of exterior of Germany's Constitutional Court in Karlsruhe, Germany, March 15, 2016, during a two-day hearing about Germany's decision to shut down all nuclear plants by 2022. REUTERS/Ralph Orlowski

Germany’s Environment Minister Barbara Hendricks called the ruling a “colossal nuisance” as well as a slap in the face for the previous coalition under Chancellor Angela Merkel that was in charge when the tax was introduced in late 2010.

The verdict marks a second success for utilities after a court ruled in December that a push to shut down all of Germany’s nuclear plants violated some of their property rights.

E.ON, RWE and EnBW have been hit hard by Chancellor Merkel’s swift decision to exit nuclear power by 2022, a move prompted by the disaster at Fukushima, Japan, in March 2011.

Imposed between 2011 and 2016, the nuclear fuel tax has further weighed on utilities, amounting to payments of 6.285 billion euros from nuclear plant operators. A source familiar with the matter said the sum to be paid back could exceed 7 billion euros.

Merkel, who faces a national election in September, said on Wednesday the ruling, which effectively forces the government to refund utilities, would not endanger Germany’s budgetary goals.

Earlier, the Karlsruhe-based Constitutional Court said the tax was “formally unconstitutional and void”, adding the government did not have the legal competence to claim it.

E.ON shares rose as much as 6.2 percent, hitting their highest level in more than 16 months. RWE shares, too, climbed as much as 7 percent to a nearly 2-year high. Thinly-traded shares in EnBW were up 2.6 percent.

“Little if any compensation would have been baked into consensus... so the ruling is close to pure upside for the shares,” analysts at Berenberg wrote, keeping a “buy” on both E.ON and RWE.

E.ON said the ruling meant it would be refunded about 2.85 billion euros plus 450 million euros in interest, adding this would boost its net profit and lower its net debt. RWE expects a refund of 1.7 billion euros plus about 200 million in interest.

EnBW said it has paid 1.44 billion euros.

In the aftermath of Fukushima, E.ON and RWE have both undergone major corporate overhauls, separating their conventional power plant businesses from operations such as renewables and networks.

The fuel tax required nuclear plant operators to pay 145 euros per gram of nuclear fuel each time they exchanged a fuel rod, which usually happens about twice a year.

Additional reporting by Ursula Knapp in Karlsruhe, Anika Ross and Andrea Lentz in Frankfurt and Markus Wacket and Gernot Heller in Berlin; Editing by Harro ten Wolde and Jason Neely

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