Operators of German nuclear power plants have set aside enough funds to pay for decommissioning the country's reactors, the Economy Ministry said on Saturday, even though stress tests showed the potential cost could far exceed their provisions. Germany's four nuclear companies whose shares have tumbled on uncertainty around the size of provisions made for their reactors' afterlife, said the report showed they were fully able to shoulder the cost of the nuclear exit.
E.ON, RWE, EnBW and Vattenfall are due to switch off their nuclear plants by a 2022 deadline set by Chancellor Angela Merkel's government after the Fukushima disaster in Japan in 2011. The ministry appointed auditing firm Warth & Klein Grant Thornton to subject their balance sheets to a stress test to ensure that the 38.3 billion euros ($44 billion) they have set aside in provisions to cover the decommissioning of reactors and the disposal of waste was adequate.
The auditing firm assessed the potential bill according to six scenarios assuming future interest rates and cost growth and came up with a range of 25 to 77 billion euros. While the worst case scenario shows the energy companies were still short by almost 40 billion euros, the Economy Ministry said their combined assets were worth around 83 billion euros. This meant they would be in a position to meet the costs.
"The stress test shows: the companies concerned have fully covered the costs with their provisions," Economy Minister Sigmar Gabriel said in a statement. The government now plans to set up a committee to assess the results of the stress tests and to deal with the question of how to dispose of nuclear waste in a final repository. Berlin wanted to make sure enough money is set aside to ensure that the taxpayer does not end up footing the bill if one of the companies runs into financial difficulties.
Faced with low energy prices, rising competition from renewables and uncertainty ahead of the nuclear exit, German utilities have lost more than 20 billion euros of their market value this year. The operators said on Saturday their accounting methods had been confirmed as correct and that provisions were high by international comparisons. "In view of this unequivocal finding, speculation about a possible need for higher provisions has no basis in fact," they said in a joint statement.
The current practice of working on the basis of earning 1 percent interest on the funds set aside, is a conservative and cautious enough assumption, they added. This was in response to some scenarios presented by Warth & Klein Grant Thornton that factored in very low interest rates combined with high costs, resulting in long-term negative interest rates. Accountancy firm PwC which checks RWE's and E.ON's balance sheets said the worst case scenarios described in this assessment were not part of the practices it employed to comply with financial reporting duties.
Comments
Comments are closed.