Germany's Merkel defends nuclear deal, insists it doesn't give the utilities windfall profits

RIGA, Latvia (AP) — German Chancellor Angela Merkel on Tuesday defended her government's decision to extend the lifetime of the country's nuclear plants against criticism that the deal guarantees huge windfall profits to utility companies.

On a visit to Latvia, Merkel told reporters that more than half of the extra profits will flow to state coffers, through a new nuclear fuel tax aimed at raising €2.3 billion ($3 billion) annually between 2011 and 2016, and from contributions to a special fund promoting renewable energy.

Merkel's center-right government decided late Sunday to keep Germany's 17 nuclear plants open for another 12 years beyond 2021 — the year they were to have been taken offline under an agreement struck in 2000 by the previous center-left government and the utilities companies.

But the leading opposition parties, the Social Democrats and the Greens, said the deal was a gift for the nation's four main utility companies — E.ON AG, RWE AG, EnBW AG and the German subsidiary of Sweden's Vattenfall Europe.

Greenpeace spokesman Jan Beranek said the agreement was only benefiting "several large corporations ... with massively increased profits."

The Institute for Applied Ecology, a German think-tank, argued that even if energy prices rise only moderately, the extra profits for the companies will add up to €127 billion ($164 billion).

According to calculations by the institute, three-quarters of that sum would be kept by the utility companies, with only €30 billion flowing to the state coffers, including to the fund for supporting renewable energy.

Under the "unlikely scenario of constant electricity prices in real terms," the four utility companies would still get 58 percent of the profits, or €44 billion, it said.

Merkel and the utility companies rejected these calculations.

"I think we have found a compromise that makes it clear to the energy suppliers that they have to pay a big part of their profits either as taxes or as investments for sources of renewable energy," Merkel told reporters in Riga.

"According to our estimates that is more than the half of it," she added.

Merkel said her government had intensely studied how to tax the additional profits — but the administration did not disclose its own calculations.

The opposition, meanwhile, has said it would ask the country's constitutional court to rule on whether the deal needs approval from both houses of parliament. Merkel wants to bypass the upper house as she only holds a solid majority in the lower house.


Baetz reported from Berlin, Germany.