Eon scraps nuclear spin-off plans

Eon’s plans to offload its nuclear assets to spin-off company Uniper have been axed as the German government moves to close a legal loophole which could have saved the German energy giant billions in nuclear dismantling costs.

The decision was announced by chief executive Johannes Teyssen late on Wednesday, causing shares in the company to plunge Thursday morning as investors warn that Eon’s best laid plans to counter an increasingly difficult market now lie in tatters.

Under existing law Eon would have been liable for the costs associated with Germany’s nuclear phase out for only five years after spinning off these assets into the separate company. But the German government is now moving to ensure that these liabilities, which touched €16.5 billion at the end of last year, will always remain on Eon’s books.

The company now expects to post a significant net loss in 2015 due to impairment charges in the high single-digit billion euros.

“Nowhere in the world is there a comparable precedent for separating asset ownership from liability and making this liability unlimited in duration and scope. Nevertheless, Germany seems determined to adopt this singular approach,” Teyssen said in a statement.

Eon will continue with its plans to spin-off its conventional generation assets to allow a greater focus on customers, networks and renewable energy assets but the company will be saddled with managing the shutdown of its nuclear plants which it says will be managed by separate entity named PreussenElektra (PE).

Analysts warn that the latest developments in Eon’s spin-off plans are “a clear negative”.

“It therefore appears the politicians have got the better of Eon and the previously promised new Eon, which was meant to be highly regulated and network- and customer-focused, stands to be little improved on the current business,” RBC Capital analyst John Musk said.

Eon shares shortly after 09.30 London time were over 5 per cent lower than the previous day’s close at lows at €9.16.

“We remain open to constructive solutions,” Teyssen said.

“Germany’s peaceful use of nuclear energy began as a joint endeavour between the state and energy companies. Now they share the responsibility for ending it.”