The head of EOn has insisted that nuclear still has an important part to play in Germany's future energy mix, but warned that the country's changing energy policy would be a major factor in future earnings.
|EOn's shareholders meet in Essen (Image: EOn)
Speaking at the company's annual shareholders' meeting in Essen today, EOn CEO Johannes Teyssen said: "The 2011 and 2012 financial years will be significantly impacted by the challenges we currently face in our markets, in our regulatory environment, and because of Germany's fiscal policies. You're all familiar with the most important issues: lower wholesale prices across Europe as a result of reduced demand in the wake of the global economic crisis, the threat of massive losses in our gas wholesale business because of an oversupply of gas, and billions of euros in new taxes relating to the lifetime extensions for nuclear power stations in Germany."
He added, "Of course, we're working on the right business response to these issues and have made important progress. But it's important to remember that it takes time to adjust our business to these challenges. And it's not exactly easy to deal with an unforeseeable additional billion-euro tax during a period of the most significant market dislocations in more than ten years."
In response to the accident at Japan's Fukushima Daiichi nuclear power plant following the earthquake and tsunami on 11 March, the German government announced an immediate three-month closure of the country's nuclear power reactors that began operation in 1980 or earlier. EOn's Isar unit 1 and Unterweser reactors were shut down as a result. In addition, last year's decision to allow lifetime extension for Germany's nuclear power plants beyond a pre-established shutdown schedule was suspended, contingent of the results of safety tests being carried out over the three-month closure period.
Teyssen's view: "We at EOn are participating in the public debate during the three-month moratorium. And we're not threatening to take legal action. We can understand that Germany's political leadership felt that a moratorium was necessary to give people time to think things through, even though the shutdown of older nuclear power stations has, at best, improved the perceived level of safety."
He said, "We'll remind people that our nuclear power stations remain safe and meet the world's most stringent standards, even in light of what we've learned so far from Japan. Naturally, like all nuclear operators in Europe, we expect to be measured against demanding criteria. I'll even dare to predict that Germany's nuclear power stations will tend to score better than those in other European countries."
For 2010, EOn announced that its pre-tax earnings rose by 2% year on year to €9.5 billion, while sales increased 16% to €92.9 billion. However, Teyssen noted, "Our adjusted net income declined slightly to around €4.9 billion, in particular because of the adverse impact of government regulations relating to the lifetime extension of nuclear power stations in Germany."
"The ongoing energy-policy debate renders our current-year earnings forecast difficult," he said. "For now, all our statements must be based on the assumption that our demonstrably safe nuclear power stations will be allowed to return to service after the moratorium." Teyssen warned, "If this was to change, it could have considerable consequences; however, from today's perspective it's impossible to quantify these consequences. In any case, we'll do everything we can to ensure that if lifetime extensions yield no positive effects there won't be any adverse tax effects."
EOn's forecast for 2011 earnings "is based on the assumption that the company will be able to return its nuclear power stations to service after the current moratorium expires." It pencilled in between €11.2 and €11.9 billion for earnings before tax and adjustments, without factoring in portfolio measures. It expects net income to be between €3.4 and €4.0 billion.
Nuclear to bridge gap
In September 2010, German Chancellor Angela Merkel announced a new political deal that 'extends the lives' of Germany's current nuclear reactor fleet. Reactors built before 1980 would be allowed to operate for a further eight years beyond limits imposed in 2002, and newer reactors would gain another 14 years. The deal amended a 34-year average reactor life limit imposed in 2001 by a coalition of the Social Democratic Party (SDP) and the Green Party. However, the lifetime extension of Germany's reactors came with a hefty tax of €145 per gram of uranium or plutonium set to net the government some €2.3 billion per year. The tax would be used to boost support for renewable energy.
"For a considerable time
to come, our nuclear
power stations and our
fossil-fuelled fleet ... will
also be part of any
solution for Germany to
have a secure,
friendly, and affordable
Johannes Teyssen, CEO of EOn
Teyssen said, "Germany's energy strategy called for transforming the country's energy system - within just a single generation - from conventional (nuclear, coal, gas) to almost entirely renewable... The only way Germany can get from a conventional energy world to a renewable energy world is by making use of a bridge."
"We believe that the roughly 12-year lifetime extension for nuclear power stations provides such a bridge. Germany's energy strategy remains visionary and ambitious. And it harbours enormous opportunities for industry and individuals. But the price is extending the use of the country's existing nuclear power stations."
"I want to state clearly that it would be a mistake to shorten or narrow the bridge represented by nuclear energy. The essence of a bridge is not that it's short or long, narrow or wide. Rather, its essence is that it spans a gap and links the two sides. The transformation of the energy world can't be accelerated or shortened at will. Even people who support other energy strategies concede that substantially curtailing the operating lifetimes of nuclear power stations would make it necessary for Germany to build more fossil-fuelled capacity, import a lot of power (and non-renewable power at that), and accelerate the construction of smart energy networks."
Teyssen stressed, "I know that many people in Germany ... have concerns about nuclear technology. But it's a simple fact that each alternative strategy has its own ethical, economic and social disadvantages compared with the German federal government's bridge plan from last autumn."
He stated, "For a considerable time to come, our nuclear power stations and our fossil-fuelled fleet ... will also be part of any solution for Germany to have a secure, environmentally friendly, and affordable energy supply."
With regards to Germany's future energy policy, Teyssen said, "We'll have to wait and see what decisions are made this summer."
Researched and written
by World Nuclear News