Investors in Germany’s biggest power producers are set for a multibillion-euro windfall after the nation’s top court blocked a controversial tax on nuclear fuel that hobbled the utilities’ earnings.
The utilities are set to recover about €6bn ($6.7bn) after yesterday’s ruling. The verdict means RWE shareholders could be in line for a special dividend, while EON SE may be able to forgo a sale of hybrid bonds, according to analysts at RBC Europe Ltd and Independent Research GmbH. EON rose the most since December and RWE had its biggest gain in 12 weeks.
EON expects that it will get €2.85bn plus about €450mn in interest, which the company will use to strengthen its balance sheet, the Essen-based utility said after the ruling. RWE had paid about €1.7bn toward the tax, the company said yesterday in a statement. The utility hasn’t yet decided how it will use the funds.
“RWE has no need for the cash so any payment received may be given back to shareholders in some form of special dividend on enhanced regular dividend,” John Musk, an analyst at RBC Europe Ltd, said yesterday in a note to clients.
Germany’s Constitutional Court said the federal government overstepped its powers when introducing the national nuclear-fuel tax in 2011. The judges rejected arguments from lawmakers that the levy was a consumption tax, for which the government would have had legislative powers. Reactor operators had to pay €145 per gram of nuclear fuel when they exchanged a fuel rod, cutting their profit.
The reimbursement would help EON repair a balance sheet hurt by a deal with Chancellor Angela Merkel’s government on funding the nation’s exit from nuclear power by 2022 as well as the billions of euros it wrote down related to the spinoff of its fossil-fuel generation business Uniper. The utility was considering as recently as last month a sale of hybrid bonds, securities that combine elements of equity and debt.
Christian Drepper, a spokesman at EON, declined to comment on the utility’s bond plans.
The windfall may reduce how much of the hybrid debt EON sells, according to Sven Diermeier, an analyst at Independent Research.
The fuel-tax rebate would also ease EON’s need for asset disposals and capital expenditure cuts in its plans to reduce net debt by about 24% to €20bn, said RBC’s Musk. “More importantly, it may allow EON to move to a more appropriate payout ratio on dividends” from 40% to 60% of adjusted net income, he said.
The constitutional court issued its ruling as guidance in a case in Hamburg. As the ruling is “clear cut,” finance authorities will most likely reimburse the funds, ending the case, said Matthias Tiemann, spokesman for the lower court. The tax had expired in 2016.
“We have taken note of the judgment of the Federal Constitutional Court on the nuclear fuel tax,” Finance Ministry spokesman Juerg Weissgerber told reporters at a regular government press conference in Berlin. “We would have expected the Federal Constitutional Court to endorse our argument that the nuclear fuel tax is constitutional.”
Yesterday’s case plays into Germany’s switch to renewables, which forced traditional utilities to reinvent themselves through reorganisations as power prices slid to a decade-low. The ruling is the second time in six months, however, that the companies have won some relief from the top court as judges in December said they should be compensated for power-production rights lost related to nuclear power.



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