Tuesday, 15 March 2011
By Nicholas Comfort
(Updates to add closing share prices in second paragraph, Merkel comments in fifth.)
March 14 (Bloomberg) -- E.ON AG led declines among Europe’s nuclear utilities on concern that explosions at two Japanese reactors may spur governments to backtrack on plans to expand atomic energy. Renewable power and natural-gas stocks rose on prospects for increased demand.
E.ON, Germany’s largest utility, fell 5.3 percent to close at 21.865 euros in Frankfurt, the biggest drop since May. Electricite de France SA, the world’s largest operator of reactors, also slumped 5.3 percent. German solar cell producer Q-Cells SE jumped 15 percent, wind turbine maker Vestas Wind Systems A/S rose 7.4 percent in Copenhagen, and natural gas producer BG Group Plc gained 3.7 percent in London.
The potential risk of a meltdown at a plant outside Tokyo after last week’s earthquake and tsunami may prompt governments to rethink plans to use nuclear energy as part of an effort to cut carbon emissions and maintain energy security, according to UniCredit SpA. That could increase demand for solar panels, wind turbines and gas, a cleaner-burning fossil fuel, as an alternative.
“Clear question marks are now being asked about the renaissance of nuclear in the west,” UniCredit analysts James Stettler and Alasdair Leslie wrote in a note to clients today. “This has helped sentiment on renewables, which are seen as an alternative to nuclear. The real winner in the medium term, however, in our view will remain gas and an increased focus on energy efficiency.”
Chancellor Angela Merkel put government plans to prolong the lifespan of Germany’s nuclear power plants on hold for three months pending the outcome of an inquiry into reactor safety.
“The situation after this moratorium will be different than it was before,” she said today in an e-mailed statement.
An independent commission will be set up to conduct the inquiry, and talks are underway with the industry on what the moratorium means for the operation of Germany’s 17 nuclear reactors, Merkel said. She indicated that may result in the closure of some plants that were slated to be shut down under Germany’s old nuclear law.
The Swiss government has put application procedures for the replacement of nuclear power stations on hold and ordered safety inspections of existing facilities to be brought forward, the Environment Ministry said in an e-mailed news release.
Utilities may face costs of 300 euros ($419) per kilowatt for upgrading the safety of nuclear plants because of the quake, Ingo Becker, an analyst with Kepler Capital, said by phone today, citing a “tentative” estimate. For EDF some of that figure, which is for plants built in 1980 and before, could be accounted for in French power market reforms, he said.
The French company, which wants to extend the lives of its reactors beyond 40 years, will need to improve their safety to match as closely as possible standards for new, state-of-the art models, like Areva SA’s EPR, the Autorite de Surete Nucleaire, said in November. The watchdog said at the time that it will give an opinion on what is needed for extensions of up to 60 years at the end of 2011.
Areva, the world’s largest maker of nuclear reactors, retreated 9.6 percent to 31.50 euros.
EDF has estimated that the utility will have to spend about 600 million euros on each of its 58 reactors, or about 35 billion euros in total, to keep them in service for more than four decades.
France could be less likely to close nuclear plants than neighboring Germany because the country depends on its 58 reactors for most of its power, said Becker, who has a “reduce” recommendation on EDF. E.ON and smaller German rival RWE AG could see older plants in that country closed ahead of schedule, according to Becker.
Governments may increase support for the renewable energy industry, according to UniCredit. Germany and Spain are among European nations that last year reduced subsidies for solar power generation after a drop in panel prices stoked demand and inflated the cost of aid.
“The medium-term outlook for solar depends on the social and political will to shoulder a significant increase in electricity cost,” Michael Tappeiner, a UniCredit analyst, wrote in a separate note today. “Looking at the associated high cost, we do not exclude a shift towards cheaper fossil fuels in the short term.”
Tokyo Electric Power Corp. and other Japanese utilities may increase output at gas, oil and coal-fired plants to replace production from closed reactors, Wood Mackenzie Consultants Ltd. said.
The biggest beneficiaries are probably global liquefied natural gas suppliers, analysts at Sanford C. Bernstein said, a group that includes BG and Royal Dutch Shell Plc. Reliance Industries Ltd., which operates the world’s largest export refinery in India, and other refiners will see demand rise, according to Purvin & Gertz Inc. Power generators in China, Taiwan and South Korea may have to pay more for fuel.
Increased demand for gas-fired power plants would “play into the hands of” German engineer Siemens AG while France’s Alstom SA “remains more heavily exposed to” generators that burn coal, according to UniCredit.
--With assistance from Christiane Lenzner in Wehrheim, Germany, Kari Lundgren in London, Zoe Schneeweis in Vienna and Brian Parkin and Tony Czuczka in Berlin. Editors: Stephen Cunningham, Raj Rajendran.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at firstname.lastname@example.org
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Posted by Reg Illingworth at 04:04