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  • bluecheese4u bluecheese4u Sep 9, 2013 1:35 AM Flag

    Investors in Germany's Utilities Should Vote With Their Feet


    Investors in Germany's Utilities Should Vote With Their Feet

    Elections Won't Clear Clouds Hanging Over E.ON, RWE.

    September 8, 2013, 5:02 p.m. ET

    Hope is the last thing to die.

    German utilities RWE RWE.XE +6.42% and E.ON EOAN.XE +4.91% spent years thinking Europe's electricity markets would open up completely and nuclear power would remain viable. Then German politics, in the form of big subsidies for renewable power and a post-Fukushima nuclear shutdown timetable, intervened. Now, with German elections due this month, the two are pushing for a rethink, arguing current policies risk power shortages.

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    They may be right. But that doesn't mean they will win. On the surface, the utilities seem to be knocking on an open door, with Germany's two big parties proposing major overhauls.

    Large subsidies have fueled a tenfold increase in renewable capacity in Germany since 1998. The extra supply, with no fuel cost, crushed electricity prices, squeezing margins on traditional power plants. If the latter close, that raises the potential for blackouts, as renewable power depends on the weather.

    Hence, the industry is pushing the idea of a capacity market: essentially, paying power plants simply for existing. Regional governments in Bayern and Baden-Wuerttemberg, threatened more than others by possible power shortages, support such programs. But a big part of the conservative camp, which polls suggest will lead the next government, questions further market interventions. So, investors shouldn't expect anything on that front soon.

    Changes in the Renewables Energy Act look closer, with conservative Chancellor Angela Merkel loudly promising overhauls. The liberals, her current and preferred future coalition partner, plead for a more market-driven approach in the energy sector. Even the Socialists have spoken out against excessive subsidies for renewables.

    But the size of any cuts still is to be discussed. Moreover, politicians are eager to keep a li

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