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The share price of Germany’s two major utilities climbed between 3-6 per cent Thursday morning following news that the German government has scrapped plans for a penalising carbon levy in favour of a coal-plant reserve scheme.
The German government aims to cut its carbon emissions from the coal sector by 40 per cent by 2020 but original proposals to impose a carbon levy would have hit the parent companies of npower and Eon UK which continue to generate from profitable coal-fired units.
The new plan will allow 2.7 GW of coal-fired power capacity to be removed from the market and placed in a reserve mechanism to secure supply and compensate the generators.
According to a report from Reuters earlier this week the new plan could net the companies “a few hundred million euros in the process”.
“It is a less penalising decision than the original proposal for a carbon levy, although we will need details on the timeframe of the plant closures and likely compensation to fully evaluate the effects on the companies,” an investor note from Citigroup said on Thursday morning.
By lunchtime RWE shares were over 6 per cent higher than the previous close at €20.57 per share while Eon’s share price rose around 3 per cent higher to €12.43 per share. Both share prices have begun to soften in the afternoon.
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