E.ON to sue over nuclear shutdown

E.ON is suing the German Government for billions of euros in damages over its dramatic U-turn on nuclear power after the Fukushima meltdown in Japan. The energy company's German rival RWE, which operates as RWE npower in Britain, is also considering legal action.

On Monday the German Government said that it was reversing a plan to extend the life of the country's 17 reactors by 14 years, bringing forward their closure to 2022. Eight of the oldest reactors - four of which are owned by E.ON and RWE - are to be closed immediately.

E.ON said that the forced closure and a tax on nuclear fuel broke European Union law, which does not allow discrimination against nuclear power.

"The company expects adequate compensation for damages related to these decisions amounting to billions of euros," it said. E.ON owns nine reactors in Germany and Sweden and shares in 12 other reactors.

Germany's reactors generate about a quarter of the country's electricity. The decision to close them prematurely will cost E.ON an estimated (EURO)600 million of earnings this year. RWE could be worse off by about (EURO)575 million - almost one tenth of its earnings forecast for this year.

The backlash in Germany against nuclear power has profound implications for E.ON and RWE's proposal to build four reactors in Britain. Their plans are now in limbo and a contract to build the reactors is not now expected to be awarded this year.

There are also serious doubts about RWE's ability to fund the plans, which have been exacerbated by the nuclear shutdown in Germany. The two companies said last week that the moratorium had "no direct impact" on its plans to build new reactors in Britain but added that they were looking to learn the lessons from the disaster in Japan.