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27/09/2016

Auditors find that German nuclear providers can afford phase-out

Energy

Auditors find that German nuclear providers can afford phase-out

Reactor 4, Chernobyl: a stark reminder of what Germany wants to avoid by implementing a full nuclear phase-out.

[Alex Kühni/Flickr]

A German government-initiated “stress test” of nuclear power providers’ capacity to pay for the country’s nuclear phase-out has been released. The verdict is positive, but not entirely certain. EurActiv’s partner Tagesspiegel reports.

The five nuclear power providers have set aside capital on their books in order to pay for the huge costs associated with a nationwide nuclear phase-out. As of 31 December 2014, the nuclear companies have kept €38.3 billion as a provision for decommissioning nuclear power plants, interim storage and the packaging, transport and eventual disposal of nuclear waste.

The “stress test” was intended to clarify whether the energy companies have the necessary resources to meet their obligations. On Saturday (10 October), the Federal Ministry for Economic Affairs and Energy published a report compiled by the auditing company Warth & Klein Grant Thornton AG.

Vice Chancellor Sigmar Gabriel (SPD) concluded that, “the companies will be able bear the costs of the nuclear phase-out.” He added that, “the stress test shows that the costs have been fully provided for and that “the relevant rules had been complied with.”

>>Read: German energy giants to pay for denuclearisation

Gabriel said that there would be no further action needed. However, he did take steps towards implementing two measures that had been discussed before the report was made.

Next Wednesday (14 October), German lawmakers will discuss a new law that closes a loophole that has so far allowed companies to avoid liability by changing their corporate structures. The new law will ensure that companies remain liable for nuclear phase-out costs, even if they form subsidiary companies.

The other development involves the German cabinet establishing a committee to review the financing of the nuclear phase-out (KFK), which in the coming months will submit a report on how all companies can be tested and evaluated over the next decade.

Government keeps quiet on committee members

Who should actually sit on this committee has been a mystery so far. During a visit to the radioactive waste disposal commission before the summer break, Gabriel named Harmut Gassner, a Berlin lawyer, as a potential member of the committee.

Gassner has aired his concerns that so long as anti-insolvency measures are kept on a company’s books, they are not secure.

For weeks, Gabriel’s ministry has not commented on who will make up the committee and that it will be decided by the vote.

The big four nuclear companies were satisfied with the auditors’ report. In a joint statement, E.ON, EnBW, RWE and Vattenfall wrote that, “The Federal Ministry for Economic Affairs and Energy’s commissioned report on the disposal obligations of nuclear operators found no complaints regarding accounting practices.”

On the contrary, the report acknowledged that good provisioning had been carried out “for decades”. The report also confirmed that the nuclear companies provided “plausible” information regarding both cost estimates and liability provisions, which would indeed cover potential costs. “These findings have poured cold water on the speculation that larger liability provisions are necessary,” the companies noted.

Greens call for a public fund

The Greens’ nuclear policy spokeswoman, Sylvia Kotting-Uhl, commented on the report: “From the stress test we’ve been given both good and bad news. It’s good news for the taxpayer: the situation isn’t completely hopeless and it is still possible that they will not be saddled with the high costs of nuclear phase-out.”

However, the report indicated that the long-term security of disposal costs cannot be fully guaranteed. Which is hardly surprising, because the costs of radioactive waste disposal is not fully calculable.

>>Read: Greenpeace, German utilities launch suit against UK nuclear plant

It also depends on how valuable the company actually is. Kotting-Uhl said that, “The stress test shows that the current system of liability provisions is subject to great uncertainty and is not sustainable.” She called once again for a public fund to be established, into which the nuclear operators should be required to pay.

It is entirely possible that the new committee may propose such a fund. In any case, Gabriel’s ministry will provide the report as an aid for the KFK to produce a decision on nuclear phase-out financing.

Certain conclusions from the report

The report by Warth & Klein Grant Thornton is a snapshot of all five nuclear energy providers. E.ON has put aside nearly €16.6 billion for liability provisions, as of 31 December 2014. RWE similarly had earmarked €10.4 billion; EnBW around €8 billion; Vattenfall €3 billion and Stadtwerke Munich, which holds shares in nuclear plants, has made €564 million available on its books for decommissioning and nuclear waste disposal. 

The auditors combined the data from all five companies, as individual figures might have revealed business practices, which may have affected competitiveness, meaning the companies would have been less likely to willingly provide information in the first place.

Before the auditing process started, the ministry and companies had agreed upon how costs and liability provisions should be calculated. According to these guidelines, the auditors then considered various scenarios in order to analyse a range of possible developments.

Disposal costs

The cost of decommissioning, interim storage and transport and disposal of nuclear waste is around €47.5 billion, which is higher than in other countries. This does not quite tally with the €38.3 billion the five companies have set aside on their balance sheets.

The companies have set aside €857 million for decommissioning a nuclear power plant. Internationally, it would cost €205-542 million, reported the auditors. In this area alone, they estimated that €6 billion in savings could be found. Depending on nuclear-specific costs and inflation, estimated disposal costs lie between €29.9 billion and €77.4 billion.

Company worth

The auditors compared liability provisions with the potential worth of the companies, based on conservative and low-interest rate estimates. The companies are currently worth €81.3 billion, which with the nuclear liability provisions deducted leaves a total of €44.5 billion.

>>Read: France moves to salvage its nuclear sector

With these assets, the firms could finance the necessary nuclear disposal themselves. However, the auditors also noted that “the nuclear liability provisions only correspond to the power production sector”, which would not be enough to cover decommissioning obligations.

In other words, the companies’ electricity production is worth less than the necessary liability provisions. This is the report’s ultimate main weakness. It is not capable of predicting how electricity prices will develop in the future or how the traditional power production of the companies will continue to depreciate.

In the same vein, it does not take into account whether a similarly large increase in renewables will happen in the coming decade or what the effect of lignite mining costs will have on the companies’ balance sheets. The report is simply a snapshot of an unpredictable and uncertain future. Nothing more.

This article appeared on EurActiv Germany.

Timeline

  • 11 March 2011 Fukushima nuclear disaster
  • 6 August 2011 Eight nuclear reactors in Germany shut down
  • 2022 Proposed date of completion for full phase-out of nuclear power

Further Reading