German decommissioning provisions in place, ministry confirms

12 October 2015

A stress test ordered by the German government has shown that the country's nuclear energy suppliers are able to cover the costs of decommissioning their power plants and disposing of radioactive waste.

The country has committed to close all of its nuclear power plants by 2022 and replace the lost capacity with an increase in renewables under the Energiewende policy, adopted in 2011 in response to the Fukushima nuclear accident. The costs of plant decommissioning and radioactive waste disposal remain the responsibility of the energy supply companies. Economy minister Sigmar Gabriel announced in July that a stress test would be carried out to assess the costs and the government would then draw up legislation later this year to ensure that the necessary funding is in place.

The outcome of the stress test was presented in an expert opinion prepared for the country's Federal Ministry for Economic Affairs and Energy and published on 9 October. Announcing the results of the stress test, Gabriel said that the companies concerned had made sufficient provisions to cover all of the costs and had done so in compliance with the relevant rules. Their combined assets would cover the costs of decommissioning the power plants and disposing of radioactive waste, and the expert opinion did not point to any need for additional action to be taken beyond these steps, he said.

German nuclear suppliers EnBW, EOn, RWE and Vattenfall said that the report effectively accepted accounting practices which they had been using for decades. In a joint statement, the companies said that in view of the report's "unequivocal" findings, "speculation about a possible need for higher provisions has no basis in fact."

The expert opinion was prepared by auditing company Warth & Klein Grant Thornton AG, who found that the €38.3 billion ($48.5 billion) of provisions made by the companies was based on higher cost estimates than the international average. Dismantling costs are estimated at €857 million  ($972 million) per reactor in Germany, compared to €205-542 million ($233-616 million) in other countries. The auditors declared that the €38.3 billion figures had been calculated correctly by the companies, and was based on a "sound estimate" of costs, cost increases and discount rates, but also noted that efficiencies in dismantling plants could lead to an overall cost reduction of around €6 billion ($7 billion).

The stress test developed scenarios also included a sensitivity analysis based on a range of assumptions of future interest rates and cost increases. This found that the provision needed could vary from €29 billion ($33 billion) to €77 billion ($88 billion), but the German energy companies said that assumptions of long-term very low interest rates accompanied by extremely high cost and price increases rates underlying the most extreme cases were not realistic. "This will not alter the companies' recognized accounting practices, since the underlying assumptions of such sensitivities are unrealistic and have never been used in any sector," they said.

Gabriel also said that the extreme scenarios were unlikely. "We do not consider the scenarios requiring the highest provisions to be likely to materialise, as they are based on the assumption of major losses being incurred by the companies over a long period of time," he said. The report found that the companies' combined market-oriented net assets of about €83 billion available for covering the costs would in any case be more than sufficient to cover the highest provisions foreseen under the stress test scenarios.

The German cabinet is soon to establish a commission to review of the financing of Germany's nuclear phase-out and to adopt draft legislation on extended liability for the dismantling of nuclear power plants and the disposal of nuclear waste, Gabriel said.

Researched and written
by World Nuclear News