When it was announced that all German nuclear reactors were to be taken offline over a period of months, E.ON chief executive Johannes Teyssen warned of serious supply shortages and the possibility of the country’s electricity grid becoming unstable because it is not designed to handle the necessary redistribution of power from renewable sources in the north of Germany to the south.
The company has maintained a positive stance over the recent months, compared to rival RWE, which announced in early April that it would take sue the German government if the courts backed its view of the initial three-month stoppage.
On 9 August RWE reported its first-half results, pointing to government decisions as worsening the company’s economic framework conditions as recurrent net income fell by 39%, driven down by costs related to the decision to phase out nuclear power.
E.ON, on the other hand, was reported at the same time to be planning to invest EUR2.6bn into boosting its renewable capacity in 2013, following EUR1bn of investment last year, despite net income falling by 77%, or over EUR3bn, to EUR948m in the first half.
The difference is reflected in how both companies’ Corporate Leadership scores have fared since the start of April, with E.ON averaging 5.99 while RWE languishes at 5.71.
The potential for returns on investment compared to possible adverse publicity over a legal case is likely to lead to investors preferring E.ON to RWE, and E.ON has also outscored its rival for Financial Performance in the past five months. However, the results announced this month have left E.ON’s score for Financial Performance below RWE’s so far for August.
Although in terms of corporate leadership E.ON has reacted well to the nuclear issue, there are reputational risks in other aspects from its response.
It is planning to close three businesses in Germany to cut costs, Der Spiegel reported in late July, and up to 11,000 jobs could be cut this autumn because according to Mr Teyssen the reduction of non-personnel costs alone will not achieve the necessary cost savings.
Over the past six months E.ON’s reputation score for Corporate Culture has fallen steadily and it had dropped below five by the middle of July, and an unstable employee environment will not help the company attract the skills necessary to adjust to Germany’s low-carbon future.
— By Stephen Thrift, consultant analyst at Alva