FRANKFURT (Reuters) - Germany’s biggest utilities have set aside tens of billions of euros to fund the country’s exit from nuclear power from 2022, when the last reactor leaves the grid and the clear-up begins.
But as an energy crisis puts the value of the assets underpinning those provisions at risk, concerns are growing that taxpayers may end up footing part of the bill, undermining an ambitious shift to renewable power on which Chancellor Angela Merkel has staked a hefty chunk of political capital.
The broad expansion of solar and wind energy has already hit private citizens’ pockets, as well as forcing the utilities to adopt riskier business models that, analysts say, could put some of them out of business.
“There are worries that the traditional utility business will no longer deliver enough profits to fund the provisions,” said a senior accounting source. “That concern is valid.”
Germany’s “big four” - E.ON, RWE, EnBW and Vattenfall [VATN.UL] - have piled up 36 billion euros ($42 billion) to switch off their nuclear plants by a 2022 deadline, set following the Fukushima disaster in Japan in 2011, and to pay for waste storage. [POWER/DE]
Those are the highest nuclear provisions in the world, reflecting Germany’s determination to establish a template for other nuclear nations on coping with the afterlife of reactors over several decades.
But the firms are under pressure from low wholesale power prices, weak demand in the euro zone and soaring supplies of subsidized renewable energy, which is gradually pushing gas- and coal-fired power stations out of the market.
Analysts therefore see little upside for Germany’s biggest utility stocks, which have lost 125 billion euros in market value over seven years.
That adds to impressions that the industry faces an uncertain future and, in the most drastic response to the crisis so far, top player E.ON span off part of its business late last year
The firms offer regular assurances that they can meet their nuclear responsibilities - “our provisions are checked annually in great detail by independent outside evaluators,” E.ON’s finance chief said in November - but that does not necessarily mean the cash will keep flowing through the coming decades.
At 14.6 billion euros, E.ON holds the most of the industry’s nuclear provisions, with RWE and EnBW and Vattenfall holding progressively smaller shares.
There is little concern about the overall 36 billion euro figure, but whether the assets standing behind the provisions can be turned into money is far less clear.
Utilities have not spelled out how the provisions are backed up, saying only that some are held in cash and the rest in undisclosed assets and instruments.
Sector analysts reckon that while part is invested in asset classes such as equity or pension funds, much is backed by power networks and plants whose value has plummeted.
Over the past year, E.ON, RWE, EnBW and Vattenfall have announced nearly 12 billion euros of writedowns and impairment charges, mostly due to tumbling power prices.
“It is becoming clear that the investments in power plants ... can’t simply be converted into cash,” said Felix Matthes of green think tank Oeko-Institut, which regularly advises the government.
He said E.ON and EnBW held most of their provisions in safer investments, but Vattenfall and RWE were more exposed, pointing to lignite assets that were declining in value.
Some politicians fear the utilities may eventually leave the state to shoulder the problem, and that the largest - like the banks judged “too big to fail” - could have to be nationalized.
E.ON’s split carried the risk “that the financial burden of unwinding the nuclear plants will fall to the state,” the environment minister of Lower Saxony state said last month.
Oliver Krischer, parliamentary energy spokesman for the Green Party, noted that Germany’s nuclear history was “full of examples of profits being privatized and costs rolled over to the public.”
The federal Economy Ministry has commissioned a study on how to safeguard the decommissioning funds, and results are expected this month.
“It is the job of the government to prevent this (erosion of asset value) from happening,” Krischer told Reuters.
($1 = 0.8594 euros)
editing by John Stonestreet