TAX NEWS - 2010

Germany Tax: Fuel-Rod Tax Tied To Nuclear Extension

BERLIN -- The German government's proposed tax on nuclear energy will be linked to a planned extension of reactor operating lives, deputy economic minister Jochen Homann said Wednesday.

"The economic minister [Rainer Bruederle] and his ministry assume that the proposed tax on nuclear fuel rods will be linked to an extension of nuclear reactor lives," Homann told delegates at an energy conference in Berlin.

He added, however, that the details of the tax on nuclear fuel rods still need to be worked out by the finance ministry.

On June 7, the government announced plans to impose taxes on nuclear power-plant operators as part of a package of austerity measures in a bid to rein in public budget deficits.

The government expects the duty on nuclear reactor operators will contribute EUR2.3 billion in tax income a year to the package of austerity measures, with an overall volume of EUR81.6 billion between 2011 and 2014.

The government's proposal has caused confusion in the energy industry as the announcement left open the question if the levy will be the price nuclear power-plant operators will have to pay for longer operating lives of their reactors.

Germany is in the process of gradually phasing out all of its remaining 17 nuclear reactors by around 2022, but the government has said it plans to extend the operating lives to help achieve its ambitious climate-protection targets.

Germany's nuclear power plants are operated by utilities E.ON AG, RWE AG, EnBW Energie Baden-Wuerttemberg AG and Vattenfall Europe AG.

Finance Minister Wolfgang Schaeuble earlier this month said that the planned tax on nuclear fuel rods will come "regardless of the decision to extend the lifespan of nuclear power plants."

EnBW Chief Executive Hans-Peter Villis said Wednesday he is optimistic that the tax will be tied to an extension of nuclear power plants' lives.

"Based on many conversations I have had over the past few weeks I think that there's a good chance the tax will be associated to an extension," Villis told reporters on the sidelines of the energy conference in Berlin.

However, he warned that if that weren't the case the company would consider a court challenge to the tax.

Last weekend, Villis told weekly newspaper Die Welt am Sonntag that the fuel-rod tax could reduce EnBW's annual profits by about 40%.

This month, RWE's Chief Financial Officer Rolf Pohlig didn't rule out cutting its dividend payments to shareholders if the tax were imposed.