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Germany energy stocks soar on nuclear pull-out study

Frankfurt - Shares in energy giants E.ON and RWE shot higher on the Frankfurt stock exchange on Monday after a government study suggested the two companies had sufficient financial buffers to cope with the shutdown of their nuclear power plants.

By mid-afternoon, shares in RWE were showing a gain of 12.5% and E.ON shares were 6.4% higher.

Investors appear to be relieved by the findings of a so-called "stress test" by the German economy ministry which showed that the country's four main power suppliers - E.ON, RWE, EnBW and Vattenfall - were financially robust enough to cover the cost of the country's pull-out from nuclear power by 2022.

According to the in-depth audit, the provisions of €38.3bn ($43.6bn) that the companies have set aside to cover the closure and dismantling of their nuclear power stations and the cost of disposing of the waste was sufficient.

"For us, that means the ministry will not ask the companies to set aside additional provisions," said Equinet analyst Michael Schaefer.

In the wake of the nuclear disaster in Fukushima, Japan in 2011, the German government decided to phase out nuclear power by 2022.

Eight of the country's 17 power plants are still currently in operation.

The power utilities themselves expressed relief at the audit's findings.

"Speculation of a possible need for additional provisions are unfounded," the four said in a joint statement.

Power giants under pressure

The prospect had weighed heavily on the shares of the two operators that are currently listed - E.ON and RWE - in recent months.

RWE shares have shed 47% since the beginning of the year and E.ON shares are more than 30% lower.

But critics dismissed the audit's findings.

"The assurances given by (Economy Minister Sigmar) Gabriel that no more action is needed are nonsense," said Sylvia Kotting-Uhl, a member of the opposition party, the environmentalist Greens.

Michael Mueller, a member of Gabriel's own Social Democrat SPD party, insisted that "no one is in a position to predict exactly how much it will cost," as the issue of what to do with the waste has not been agreed.

Germany is still looking for a suitable site for the long-term storage of radioactive waste, a search that is likely to take years.

Claudia Kemfert of the DIW think tank said it was "probable that the real costs will clearly surpass the estimated costs."

She supported an idea that the energy companies should set up a special fund overseen by the public authorities, so that the cash cannot be used for other purposes.

The energy companies are in a difficult situation at the moment, with wholesale electricity prices very low.

Furthermore, electricity generated from traditional gas, coal and nuclear plants is having to compete with the heavily-subsidised renewables sector.

Some observers are even beginning to question the future survival of the four power giants, which employ a combined workforce of 154 000.

RWE, for example, is the biggest operator of coal-fired plants in Europe and has embarked on a massive internal reorganisation.

Rival E.ON is planning to split its renewable energy activities from the rest.

And Vattenfall, a unit of the Swedish group of the same name, is looking for a buyer of its German assets.


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