by Andrew Follett
Energy and Environmental Reporter for
One of Germany’s largest electrical companies is facing bankruptcy due to the enormous amounts of money it poured into green energy, according to a report published Wednesday by the German newspaper Frankfurter Allgemeine Zeitung.
The German utility Rheinisch-Westfälisches Elektrizitätswerk (RWE) was forced by the government to shut down many of its profitable nuclear reactors and build expensive wind and solar power. The government’s mandate to replace nuclear reactors with wind or solar power cost over $1.1 trillion. The company has a 46 percent chance of going bankrupt within the next two years, according to investment groups.
“It is the sheer distress which is behind the project. That’s because RWE needs huge amounts of money very pretty soon. Especially for its nuclear phase-out,”Frankfurter Allgemeine Zeitung reported Wednesday. “A good 10 billion euros have been reserved already. But that is hardly enough. The Initial public offering (IPO) is presumed to generate the additional resources that are required. RWE cannot afford to accumulate more debt. It is already loaded with €45 billion [$50 billion in] long-term liabilities on the balance sheet, almost eight times its equity, a menacing rate, while the rating agencies have given RWE just above ‘junk’ status.”
RWE’s overall earnings fell by almost 10 percent between 2014 and 2015 and are predicted to fall by up to 14 percent this year. The company’s attempt to sell stock reeks of an effort to raise the money required to stave of bankruptcy.
“If the IPO goes wrong, then RWE is – as is usual for companies without a future – a case for the administrator,” the paper continued. “It would be the largest bankruptcy in German economic history.”
RWE’s only hope to avoid bankruptcy may be a lawsuit by German utilities suing the government for $21 billion in damages due to the country’s plan to shut down all nuclear reactors by 2022.
The shutdown plan has certainly done enormous damage to utilities, destroying their main sources of profit and increasing the price of electricity throughout Germany. The average German pays 39 cents per kilowatt-hour for electricity due to intense fiscal support for green energy. The average American only spends 10.4 cents per kilowatt-hour.
Nuclear power’s decline has created an opening for coal power, according to a Voice of America article published in November. Coal now provides 44 percent of Germany’s power, despite the fact that coal ash is actually more radioactive than nuclear waste.
In the year 2000, nuclear power made up 29.5 percent of Germany’s energy. In 2015 the share dropped down to 17 percent, and by 2022 the country intends to have every one of its nuclear plants shutdown. This shift caused Germany’s carbon dioxide (CO2) emissions to actually rise by 28 million tons each year after Germany’s nuclear policy changed. Germany’s government decided to abandon nuclear energy after the Fukushima Daiichi nuclear disaster in Japan galvanized opposition.
Electricity from new wind power is nearly four times as expensive as electricity from existing nuclear power plants according to analysis from the Institute for Energy Research. The rising cost of subsidies is passed onto ordinary rate-payers, which has triggered complaints that poor households are subsidizing the affluent.