German utilities win right to compensation

13 December 2016

German utilities RWE, EON and Vattenfall are entitled to compensation for power-production rights they lost through the government’s decision to phase out nuclear energy, the Federal Constitutional Court in Karlsruhe said in a ruling on 6 December. The court said the 2011 law on closure of nuclear plants had failed to tackle compensation for companies that were committed to nuclear-power production. 

Germany’s nuclear exit began in 2002, when the ruling Social Democrats and Greens reached a deal allowing utilities to produce an amount of power equivalent to 32 years of generation by operating NPPs. Then in 2010, the Christian Democratic Union-led government decided to give the utilities additional production rights. However, following the Fukushima disaster in early 2011, the government repealed the extension and set closing dates for each plant, forcing some of the oldest reactors to close within months.

The utilities lost 8,336MWe of nuclear generating capacity at eight NPPs, closing Biblis A and B, Neckarwestheim 1, Brunsbuttel, Isar 1, Unterweser, and Phillipsburg 1. Despite only starting operation in 1984, Krummel NPP was not brought back from long-term shutdown. EOn, RWE and Vattenfall then launched legal actions seeking compensation for the early shut down alleging that the change to the law constituted expropriation. Energie Baden-Wuerttemberg (EnBW), which is 45% owned by the state of Baden-Wurttemburg, did not contest the shutdown.

Presiding Judge Ferdinand Kirchhof said the 2011 law “lacks rules on compensation” but the court rejected allegations that the decision amounted to expropriation of the utilities’ property. The court did not determine damages, but instructed the government to amend the legislation by mid-2018 to include compensation. The award is estimated to be worth about €700m ($751m) for EON and €400m for RWE, Bloomberg said.

The court also decided in favour of Swedish-owned Vattenfall, even though under German law, constitutional rights protect the public against government action and state entities cannot invoke them. EnBW did not claim as a party for that reason, as it is mostly government-owned.

EOn said it had lost €8.0bn as a result of the early shut down, and Vattenfall said it had lost €4.7bn. Analysts estimated RWE's losses at €6.0bn. The three utilities issued statements welcoming the court's decision and saying they are prepared to enter constructive talks with the German government on the implementation of the ruling. 

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