The head of Germany’s second largest utility says its very existence is under threat if the German government opts to pursue its policy of forcing ageing coal-fired power plants to pay more for emissions.

The company’s operating earnings from conventional power generation tumbled by almost a third last year and CEO Peter Terium said RWE will have to at least explore splitting its business, as already done by larger rival E.ON, if the crisis intensifies.
“The so-called climate contribution for conventional power stations affects our very existence,” Terium said Thursday at RWE’s annual general meeting in Essen. “This contribution would mean immediate closure for the majority of our lignite mines and lignite-fired power stations.”

“We want our company, RWE, to remain active in all parts of the value chain,” he added.

“But we reserve the right to examine a split if market conditions and regulatory conditions should deteriorate further to our disadvantage,” he added.

As part of an acceleration in the country’s Energiewende policy, Energy Minister Sigmar Gabriel has proposed forcing coal-power plants that are 20 years old or more to buy extra European Union emission permits starting in 2017.

E.ON has taken the firm decision to split its assets into two distinct companies. In the company’s house magazine, CEO Johannes Teyssen explained the company’s rationale for the move.

“We are convinced that it’s necessary to respond to dramatically altered global energy markets, technical innovation, and more diverse customer expectations with a bold new beginning.

“E.ON’s existing broad business model can no longer properly address these new challenges. Therefore, we want to set up our business significantly differently. E.ON will tap the growth potential created by the transformation of the energy world. Alongside it we’re going to create a solid, independent company that will safeguard security of supply for the transformation. These two missions are so fundamentally different that two separate, distinctly focused companies offer the best prospects for the future.”

“The transformation of the energy system will continue to require reliable backup capacity well into the future, as well as access to global markets for energy products. With a portfolio consisting of conventional power generation, global energy trading, and exploration and production, the new company will focus precisely on meeting these needs.”

According to European CEO magazine, Teyssen deserves every admiration for his decision to take the path he has. In this month’s issue, where he is profiled, the opinion piece states, “what’s most impressive of all is his willingness to instruct radical and progressive change in an industry that has shown a single-minded desire to exploit fossil fuel proceeds at every turn. In choosing to rethink the firm’s corporate strategy, Teyssen is refraining from merely tapping known oil and gas reserves, instead embarking on the more difficult task of securing a sustainable future for the company and for the global economy.”

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