Nuclear Accord

ESSEN |

ESSEN (Own report) - The Eon Corp. in Duesseldorf celebrated new milestones at its general assembly on April 30 while ecologists were protesting. The corporation's annual consolidated sales reached nearly 69 billion Euros last year - a new company record, which surpasses the gross domestic products of several smaller EU member states. The protests were particularly directed against the company's energy production, which relies for more than a third of its electrical energy on highly polluting coal power stations and nearly half on high-risk nuclear energy. Eon will extend its engagement in the nuclear sector. Just a few days earlier, the company signed an agreement with Siemens and the French Areva companies, that foresees cooperation in the building of new British nuclear power stations and the servicing of the power stations already in operation. Eon's chances of profiting from French president Nicolas Sarkozy's nuclear offensive are enhanced with this accord. Since taking office last summer, Sarkozy has initiated numerous controversial projects with Arab countries. Germany's Siemens Corp. will also benefit. Siemens still owns one-third of the shares in the Areva NP reactor branch and the German government would like for this to be of long duration.

New Platform

At the general assembly in the city of Essen, Eon's stockholders could look back on 2007 as a successful business year, like their RWE rivals at their general assembly two weeks earlier. Eon's consolidated sales rose 7% to 68.7 billion Euros, the pre-interest and pre-tax profits rose 10%, the paid dividends were 22% higher. Germany's largest energy producing enterprise boasted that over the past year it was able to strengthen its position on the most important markets and establish "new platforms for future growth".[1]

Expansion Steps

Even though the total takeover of Endesa, the largest Spanish electric company, was a failure, Eon was still able to extensively buy into the company for 11.8 billion Euros.[2] With this success, Eon is enhancing its position extensively in Spain and Italy. Simultaneously, this has enabled its entry onto the lucrative French market. With the multi-billion Euro takeover of majority shares in the Russian OGK-4 large-scale power plant, beating out its French rival, Eon was able to position itself on the fast-growing Russian electricity market.[3] Through its exchange of shares with Norway's Statkraft electric company and buying shares in the Skarv and Idun gas fields in the Norwegian Sea, Eon was able to consolidate its position also in Northern Europe.[4] The German energy mega-corporation was also able to advance its expansion in the directions of the Middle East and Africa.

Green Energy

Eon seeks to further expand abroad and has again widened its large-scale investment program to approx. nine billion Euros. Investments of up to 50 billion Euros are planned for the period between 2008 and 2010, with a significant portion being earmarked for outside German borders.[5] One focus is on "renewable energy" sources. The amount allotted for investments in wind, hydro and biomass energy sources has doubled to reach six billion Euros. A third of this sum has already been used for the takeover and construction of facilities for the creation of ecological energy. The rest has been earmarked for investment in the USA, where the company has just bought out a wind park promoter for a billion Euros.[6] Also in Europe, it is not to be excluded that another billion may be invested in green energy. Eon is currently contemplating buying out the Australian Babcock + Brown European wind energy power stations with an estimated value of four billion Euros.[7]

Waste

Its subsidiary, "Eon Energy from Waste" is also planning a foreign expansion that would make Eon Europe's largest operator of waste incineration plants. Cornering 20%, this company is already the market leader in Germany. On the European level, there are larger competitors, mainly in France. According to Eon, the German market is nearly saturated. "If we want to grow, we have to go abroad."[8] In the waste management branch abroad, this company is hardly present. They have set their sights on the Netherlands, Turkey, Great Britain and particularly Poland, where currently the majority of waste is being dumped. Warsaw has agreed, over medium term, to abide by EU regulations and no longer store untreated waste. Eon seeks to obtain a 15 - 25% share of all of these countries' markets.

Duel

Several multi-billion Eon acquisitions are possible also in energy supply. The German energy giant's renewed attempt to take over another of Spain's largest electrical companies, Iberola, is anticipated.[9] For more than 1.9 billion Euros, Eon stands a good chance of getting a majority of shares in Belgium's gas company, Distrigaz, a supplier of natural gas, imported above all from the Netherlands, Norway and Algeria, to furnish industrial facilities, municipal suppliers and power plant operators. Eon has made it to the "semi-finals" in the competition and is now in a duel with the French Electricité de France (EDF) for the concession. Eon has a good chance of winning.[10]

Cooperation

Like its rival RWE, Eon is engaging more heavily in the high-risk nuclear technology - under constraint for the time being, mainly abroad. A few days ago Eon signed an accord with Siemens and the French Areva for cooperation in building new nuclear power stations in Great Britain. The three companies also want to extend their cooperation to the realms of research and development. Eon and Areva are also initiating a long-term partnership in the realm of service and maintenance of nuclear power stations.[11] The state-owned French partner, Areva, is the world's largest nuclear power plant constructor, having installed thirty percent of the world's functioning nuclear power stations. The export of nuclear technology is being actively supported by President Nicolas Sarkozy, who recently finished a sales tour through the Arab world that was criticized also by the German side. Sarkozy agreed to the construction of a nuclear reactor for Morocco and seeks comprehensive nuclear agreements with Algeria, Libya and the Emirate of Abu Dhabi.[12] Sarkozy has also offered assistance to Egypt for the construction of a nuclear power station.[13] Areva will deliver two nuclear power plants, worth a record eight billion Euros, to the People's Republic of China. There has never been a contract of this volume in the history of the atomic industry.[14]

Not Without Us

Extensive cooperation with the French Areva insures more than merely German participation in the booming global nuclear power business. This accord is also very important for the Siemens Corp., which owns one-third of the shares in Areva NP's nuclear reactor business sector. Contractually, the French company will be able to roll back German influence in the company in a few years, by buying out the Siemens' shares. Subsequent to the German government's intervention on behalf of the German nuclear industry, Areva's rapprochement with the German nuclear industry has further consolidated the vulnerable Siemens - Areva alliance.[15] Further, the German/French "Nuclear Accord" could be construed as a response to the British/French "Nuclear Alliance" announced at the end of March, which Berlin considers an affront to German interests.[16] Not without us, is the message emitted by the German industry.

Please read also Energie für Deutschland (I), Wende and Risikoexport.

[1] E.ON erneut unter den dividendenstärksten Unternehmen in Deutschland; www.eon.com 30.04.2008
[2] Eon schließt Endesa-Kapitel mit Milliarden-Zukauf ab; Handelsblatt 28.03.2008
[3] see also Von Spanien bis Sibirien
[4] see also Beschleunigung
[5] E.ON weitet Investitionsprogramm deutlich aus; www.eon.com 06.03.2008
[6] Eon baut das Geschäft mit Bioenergie aus; Frankfurter Allgemeine Zeitung 04.04.2008. Eon sieht grüne Zukunft in Amerika; Financial Times Deutschland 04.04.2008. E.ON baut Renewables-Aktivitäten weiter aus; www.eon.com 28.04.2008
[7] Eon prüft milliardenschweren Kauf von Windkraftanlagen; Financial Times Deutschland 19.04.2008
[8] Eon will Europas größter Müllverbrenner werden; Handelsblatt 30.03.2008
[9] see also Sehnsucht nach Spanien
[10] Eon kämpft mit EDF um Distrigaz; Handelsblatt 27.03.2008
[11] E.ON wählt AREVA und Siemens als Partner für Kernkraftprojekte; www.eon.com 23.04.2008. Kernkraftwerke: Eon und Siemens kooperieren; Manager Magazin 23.04.2008
[12] Sarkozy, der fliegende Atomhändler; Merkur 14.01.2008. See also Miscalculation
[13] Sarkozy bietet Kairo Atomkraft-Kooperation an; www.tagesschau.de 29.12.2007
[14] Frankreich liefert China Atomkraftwerke; Welt online 26.11.2007
[15] Eon-Auftrag festigt gefährdete Allianz von Siemens und Areva; Handelsblatt 24.04.2008. See also Konfrontationskurs
[16] Deutsch-französischer Atom-Pakt; Handelsblatt 23.04.2008. See also Atom-Allianzen