Bloomberg News

EON ‘Acted Early’ to Buy Back German Power on Nuclear Halts

June 16, 2011

(Updates with Unicredit comment in fifth paragraph.)

June 16 (Bloomberg) -- EON AG, Germany’s biggest utility, has bought back lost future electricity production it had already sold from two nuclear plants that were ordered to shut by Chancellor Angela Merkel in March.

“We were acting early on this, we are not uncomfortable with the situation that we are in now,” Jorgen Kildahl, EON’s board member responsible for generation and trading, said yesterday in an interview in London. “We will post a slight negative number on that, but it’s nothing dramatic.”

German power prices have jumped since the nuclear disaster in Japan on March 11 and as Merkel ordered the halt of the country’s seven oldest reactors on atomic safety concerns. EON, based in Dusseldorf, shut its Isar-1 plant on March 17 and the Unterweser facility a day later and won’t fight the government’s decision to accelerate its nuclear exit, Kildahl said.

German next-year power, a European benchmark, rose 12 percent to 59.65 euros ($84.38) a megawatt-hour from March 11 to today. The contract slid as much as 0.7 percent today, the most since June 6.

“They realized straight away that these nukes won’t come back and covered themselves,” said Lueder Schumacher, a Unicredit SpA analyst in London, said today by e-mail. “Not so much smart as common sense.”

EON had hedged, or sold, 90 percent of its 2011 generation and 80 percent of its 2012 power as of March 31, according to slides on the company’s website.

500 Million Euros

“They had to do this quickly, because of the sales commitments they have,” Per Lekander, UBS AG’s global head of utility research, said today by phone from Paris.

EON will lose as much as 500 million euros in sales this year from lost nuclear production and buying back electricity, according to the Swiss bank. The utility also co-owns two reactors in Germany with Vattenfall AB, the Nordic region’s biggest utility.

Annual output from Isar-1 and Unterweser is about 15 terawatt-hours, Kildahl said. He declined to say how much of the lost output EON has so far bought back.

“It’s not really a huge number for us,” he said of the nuclear output from the two plants. EON’s total generation last year was 275.5 terawatt-hours, of which 26 percent came from nuclear stations.

--Editors: Rob Verdonck, Bruce Stanley

To contact the reporters on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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