An RWE-owned coal-fired power plant in Germany. The country originally planned to close its last nuclear plant by 2036.
An RWE-owned coal-fired power plant in Germany. The country originally planned to close its last nuclear plant by 2036.

Germany falls back on coal



Germany will extend the life of coal-fired power stations to replace supply from the nuclear plants that could be shut down in the wake of the Fukushima disaster in Japan.

The three-month moratorium on seven nuclear power stations could be made permanent, and the rest of the country's nuclear stations will be shut down by 2020, a decade earlier than planned, according to Juergen Becker, the German environment and nuclear safety secretary.

"The present discussion in Germany goes in the direction that the nuclear power plants that have been closed down during the moratorium will not be put back into operation - but they will be shut, closed down," Mr Becker said on the sidelines of an International Renewable Energy Agency summit in Abu Dhabi. "What will have to happen is that still-existing coal power plants, their operational time will have to be extended for some time, which will be a bad thing for our [carbon dioxide emmission] balance."

He made his comments as UAE officials explained its nuclear energy programme to other nations during a two-week meeting at the International Atomic Energy Agency, the global nuclear watchdog, in Vienna.

Of the countries that have reconsidered nuclear power since last month's earthquake and tsunami in Japan that triggered a partial meltdown and radiation leakages, none have reacted as strongly as Germany.

No decision has yet been taken on the future of the seven reactors. That hinges on the findings of two commissions set up last month by Angela Merkel, the chancellor. The Nuclear Safety Commission will be responsible for technical inspections for all German plants. Mrs Merkel has said she would provide a new energy plan by mid-June.

"The risks were well known before Fukushima, but Germans in general are sensitive of these issues," said Stefan Gsanger, the secretary general of the World Wind Energy Association, an industry group based in Germany.

Germany had originally committed to close its last nuclear reactor by 2022. But in September the government extended that date to 2036.

Before the moratorium, nuclear power accounted for more a quarter of Germany's electricity supply. Renewable energy and modern coal-burning plants originally intended to replace older coal-burning plants will have to make up the lost power.

"The situation has somewhat shifted because these new efficient power plants were built to replace old, inefficient coal power plants, but now we will need them to replace nuclear power," Mr Becker said. "Then we will have to make an extra effort to replace these old coal power plants by renewables. By the end of approximately 2020, we will have filled the gap and all the nuclear power plants can be shut down."

He declined to put a figure on the total cost of the required investment.

Germany intends to replace nuclear power, considered by many to be a clean energy source, even while meeting a target to cut emissions by up to 95 per cent by 2020, compared with 1990 levels.

The country has had to import electricity since the moratorium, according to the state utilities association. But wiping 7,000 megawatts from domestic production has not hurt Germany's industry, Mr Becker said.

"There's no problem at all, because we used to have an export of electricity," said Mr Becker. "All the lights are on in Germany."

But an early phase-out would be costly to its four biggest energy companies, which will lose an estimated €500 million (Dh2.6bn) from the moratorium alone. On Friday, the utilities company RWE sued a state in Germany where the company had a plant under moratorium.

Germany's planned phase-out comes as countries in the GCC contemplate producing nuclear power for the first time, with the UAE in the lead. Abu Dhabi has broken ground on the proposed site of a US$20 billion (Dh73.45bn) nuclear plant, set to begin producing power as early as 2017.

* additional reporting by David Crossland

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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