In a ninth-floor office overlooking the Rhine, Dr Wulf Bernotat lights a cigar
as he maps out the future of Britain’s energy industry.
The chief executive of E.ON, the world’s largest publicly traded power
company, is in expansive mood.
“As far as infrastructure is concerned, there is a lot the UK needs,” says Dr
Bernotat, who is overseeing a €63 billion (£49 billion) European investment
programme in everything from offshore wind power to new nuclear reactors —
much of which will be spent in Britain.
“But you cannot put all your eggs in one basket. You need to have the right
blend of generation . . . coal, gas, nuclear and renewables.”
Dr Bernotat, a bull-like 59-year-old with a steely demeanour, is Europe’s most
powerful energy baron, heading an industry colossus with revenues of €69
billion and profits of €12.5 billion last year.
Politicians and campaigners talk a lot about the need to invest in new types
of energy, but only a handful of people have the clout to back up words with
action — and cash.
For E.ON, which employs 88,000 people from Russia to the United States and
owns great swaths of the continental power industry, Britain may be a
comparative sideshow.
Yet since its 2002 acquisition of Powergen, the UK’s third-biggest power
supplier with 8.5 million customers, Dr Bernotat has learnt a lot about the
country’s creaking energy sector, which for decades has been starved of
investment and left dangerously over-reliant on ageing nuclear plants and
North Sea gas.
Now, after years of dawdling, the Government finally has grasped the nettle of
reform, he says.
“They started the process late, but hopefully not too late,” he shrugs,
speaking to The Times at E.ON’s sleek corporate HQ in Düsseldorf.
Over the next ten years, British industry will be transformed as old nuclear
and coal plants are replaced or retired from service while the Government
seeks to drive through big increases in renewable generation to cut carbon
emissions dramatically. Much of the national grid will need to be rebuilt to
accommodate the changes. Yet while this shake-up, in which E.ON will be a
key player, is long overdue, Dr Bernotat offers few crumbs of comfort for
the company’s British customers, already feeling the pinch from fuel price
increases of up to 15 per cent in February.
“There is a price that consumers will have to pay, because those additional
costs will ultimately be passed on to them,” he says. “You can’t have more
technology and fewer carbon emissions at zero cost.”
Set against a background of soaring global prices for oil, gas and coal, he
suggests that further price rises are all but inevitable.
“If you don’t see any relaxation of the wholesale product price, then the
prices will follow,” he says.
Perhaps this is why he sounds so frustrated by politicians in Brussels and
Whitehall who set what he calls “totally unrealistic” targets aimed at
boosting investment in renewable energy.
The European Union, for example, set out plans in January for Britain to boost
its proportion of electricity generation from renewables to 40 per cent by
2020, up from lessa than 5 per cent today. “We are investing for the future
of our business, not to hit political targets,” Dr Bernotat says.
He believes that the public does not understand the implications of the
investment required to achieve this: “I believe they have never been asked
and they have been kept in the dark about what the cost might be. It means
higher prices for their energy and governments are not paying for this.
“Governments must be honest. It will cost something . . . and is society
prepared to shoulder all this?”
It’s hard to deny E.ON’s commitment to renewable energy. Last month, the
company unveiled plans to channel €6 billion by 2010 into new projects
across Europe.
After the withdrawal last week of his former employer Shell, E.ON is one of
two remaining partners in London Array, a £2 billion project to build the
world’s largest offshore wind farm in the Thames Estuary.
Nevertheless, Dr Bernotat has reservations and says that it is naive to expect
too much: “Renewables cannot be seen as baseload generators. You cannot
render your whole electricity supply to the volatilities of wind and sun.
For that, you need nuclear — or coal.”
Indeed, Dr Bernotat seems to be surprisingly enthusiastic about the future of
coal, a fuel viewed by many as the dirtiest and most outmoded of all.
“We need coal for supply security,” he says. “Coal is available in volumes
that are much higher compared with oil and gas. The coal that the world has
ultimately will be used.”
It may not be a view that delights environmentalists, as campaigners against
E.ON’s proposed new coal-fired plant at Kingsnorth in Kent, the UK’s first
for 20 years, know well. But he believes that the development of carbon
capture and storage technology “to make coal acceptable to society” is a key
challenge.
Quite how this can be achieved on an industrial scale is unclear, he admits,
although he does cite some surprisingly left-field suggestions. Fixing
carbon by feeding it to algae could provide one solution, for example.
The relatively low cost with which coal-fired plants can be built and E.ON’s
close ties to the coal industry in Germany, where it still generates the
bulk of electricity, may provide a further explanation for his position.
Dr Bernotat sounds rather more lukewarm on the prospects for another
controversial energy source — nuclear energy. While he insists that E.ON
wants to be a key player in the drive to build a fleet of new reactors in
Britain, he is cautious on the scale of its ambitions.
“We have expressed our interest in being involved and we have to see how we
can ultimately position ourselves,” he says, adding that there are still big
risks associated with it.
Public opinion on the issue remains brittle, he says, and at an estimated cost
of up to €6 billion per reactor he is determined not to concentrate too much
investment in any single fuel or country.
Dr Bernotat, who was paid €4.1 million in 2007, does not seem like a man under
pressure. Nevertheless, his sprawling energy empire is under attack from
regulators in Brussels, who aoppear to believe that E.ON’s ownership in
Germany of both a big chunk of the country’s power generating capacity and
its network distribution business means that it wields an unfair advantage
over rivals.
A row with the EU escalated when it emerged that a seal had been broken after
a raid in 2006 on E.ON’s offices during a competition investigation into the
German power market.
E.ON, which received a hefty fine for the incident, has fervently denied
tampering with the seal, which was placed over a door to protect files that
had not been inspected by investigators.
A few months later, however, it announced plans to sell off some of its
assets, including power plants and much of its pipes and wires business in
Germany, in order to settle a lawsuit with the EU that could have cost the
utility billions of euros in fines.
Dr Bernotat sounds unfazed by mention of the dispute. “We have taken a
business decision on what is the best for our company,” he says. “I don’t
want to be forced to sell my transmission business.”
He says the sale is likely to be finalised later this year once a settlement
has been agreed with Brussels.
His views are unchanged. “Unbun-dling is not the right measure to create more
competition in Europe,” he insists.
Others disagree. They say that the stranglehold that E.ON and rivals such as
EDF, of France, have is unhealthy and they have welcomed the sale as the
start of a seismic industry shift.
Cynics have even argued that it is this very lack of competition in Europe
that has fostered the growth of giants like E.ON and EDF, who in turn have
had the muscle to gobble up domestic power companies in Britain’s much more
liberalised energy sector.
That may be one reason why most of the final decisions over Britain’s future
energy mix will be made in boardrooms in Germany, France and Spain rather
than Britain.
Dr Bernotat, meanwhile, appears to have moved on. He has even bigger things on
his mind: climate change.
“I have seen enough evidence that it’s a very serious situation… What I am
advising is that this issue should be addressed in a realistic way and not
just targets that are unachievable - even under the most positive
conditions.”
E.ON - facts and figures
— World’s largest investor-owned energy services company
— Based in Düsseldorf, western Germany
— Formed in June 2000 by the merger of VEBA and VIAG, two of Germany’s largest
industrial groups, dating back to the 1920s
— Employs 88,000 people globally, of whom 17,000 work for E.ON UK (formerly
Powergen)
— Group profits of ¤69 billion in 2007
— Owns power generation, gas and electricity distribution businesses across
Europe, Scandinavia and Russia and in North America
CV
Born September 14, 1948, Göttingen, Lower Saxony, West Germany
Education Studied law in Göttingen. Took bar exam, then doctorate
(1969-76)
Career 1976-81 Shell, Hamburg corporate attorney, legal
department; 1981-84 Shell, London (UK). Business development manager,
Eastern Europe; 1984-89 Shell, Hamburg. Head of various divisions; 1989-92
Shell, Lisbon. General manager, Portugal; 1992-95 Shell, London (UK)
Area co-ordinator Africa/Co-ordinator Coal Business Southern Hemisphere; 1995-96
Shell, Paris (France) Member of the board of Shell France, responsible for
downstream activities; 1996-98 VEBA, . Board member responsible for
supply and marketing, refining and distribution and petrochemicals; 1998-2002
Stinnes AG, Mülheim (Germany). Chairman; 2003- E.ON, Düsseldorf.
Chief executive officer
Family: Married, two daughters
Other interests: Playing golf (favourite courses include Augusta,
Georgia, Loch Lomond and Gleneagles in Scotland), travel, politics, skiing
in Austria
