Karl-Ludwig Kley Energy Policy 'Unprofessional and Flawed'

Karl-Ludwig Kley, who will become the supervisory board chairman of struggling power giant E.ON in June, laced into Chancellor Angela Merkel’s energy policy, telling Handelsblatt its implementation was unprofessional and flawed.
Merck's retiring CEO Karl-Ludwig Kley wants a change in energy policy.

In an interview with Handelsblatt, Mr. Kley, who is retiring as chief executive of German drugs company Merck KGaA after a decade in the job, said that since the Fukushima nuclear accident in Japan in 2011, Germany no longer had a reliable energy policy ensuring supply security and competitive prices.

His remarks are significant, as he is due to take over as supervisory board chairman of E.ON, Germany’s biggest power company, in June.

Germany’s top utilities have emerged as the losers of Ms. Merkel’s green energy transition, a bold plan to wean Europe’s largest economy off fossil fuels by 2050.

Firms including E.ON and RWE have suffered huge losses due to a surge in subsidized renewable energy, which in turn has caused a plunge in wholesale electricity prices. They also face billions of euros in costs to dismantle their nuclear power stations as part of the country’s nuclear phaseout by 2022.

The end of nuclear power and a clear reduction in CO2 are a given. But I regard the implementation as unprofessional and flawed. Karl-Ludwig Kley,, incoming head of E.ON's supervisory board

E.ON in March posted a record loss for the second year in a row in 2015 and blamed €8.8 billion, or $10 billion, in writedowns on its power plants, most of which are making losses as they’re no longer used enough to be profitable, being increasingly replaced by solar and wind power.

Asked if he thought the nuclear phaseout was wrong, Mr. Kley said: “I accept the political goals of the energy transition and share them in part. So the end of nuclear power and a clear reduction in CO2 are a given. But I regard the implementation as unprofessional and flawed.”

Asked to elaborate, he said: “Both goals should be pursued with a realistic exit process that allows the energy companies and the (energy) consuming industrial firms to implement the changeover sensibly. Sometimes physics and technology move more slowly than the political will. Society and the government should accept that.”

He added: “Germany’s economy needs a reliable energy policy with supply security and competitive prices. We have lost both since the Fukushima accident and the decreed transition.”

Turning to Merck, Mr. Kley indicated that the company would likely shun further acquisitions in its drugs segment, and he criticized the brisk takeover activity by other companies in the sector.

 

Merck, Restructured-01

 

But he added that Merck had been right to embark on a series of takeovers after he became chief executive in 2007, culminating in its biggest acquisition, the $17 billion purchase of U.S. life science company Sigma-Aldrich, last year.

“We turned a slightly old-fashioned pharma and chemicals company into a modern science and technology company,” said Mr. Kley of Merck, Germany’s oldest drugs company.

“We were too small in many areas, in specialty chemicals as well as in the pharma sector. And our R&E department simply wasn’t developing any of its own drugs to market maturity. We weren’t that badly positioned financially but the future of the company didn’t look nearly as rosy as the present at the time.”

141 Merck - WTB Neu 31-03-2016-01
We turned a slightly old-fashioned pharma and chemicals company into a modern science and technology company. Karl-Ludwig Kley

Mr. Kley’s strategy bore fruit. Under his leadership, Merck’s sales and market valuation doubled, and he focused the group on the three divisions: drugs, specialty chemicals (especially liquid crystals for TV, computer and smartphone displays) and life science. He conceded that Merck hadn’t been developing new drugs but said he was certain that would change soon.

“Our healthcare business is managed much more professionally today. And our most important pipeline project, the cancer drug Avelumab, is showing very promising results in the clinical trials.”

Asked if Merck needed new acquisitions to boost its drugs division, he said: “Further acquisitions probably wouldn’t help. The focus now must be to drive and optimize internal drug development.”

At present, many drugs companies are opting for big acquisitions. It’s a risky strategy because they could end up making the same mistake as the financial sector — neglecting their real purpose of developing new products and thereby losing the confidence of customers.

 

Quelle: dpa
Innovation, not just takeover, should drive the pharma industry, according to Mr. Kley.
(Source: dpa)

 

Asked to comment, Mr. Kley said: “I see that danger. A business model devoid of proprietary research and based only on takeovers and subsequent price increases doesn’t amount to what I would call responsible management.”

He rejected criticism that the pharmaceutical sector charged too much for its drugs, saying it was hard to convey to the public just how expensive developing new medicines is. He took a swipe at the government here too. “Almost everyone is aware that our health system has become much too complex and inflexible. Sadly we lack the political power to tread new paths.”

He called on all the stakeholders — the government, doctors, health insurers and the drugs industry to “climb out of their trenches” and talk about reorganizing the health system to encourage innovations, boost efficiency and improve the service. “It can’t just be about cost aspects but also about giving doctors more time to care intensively for their patients,” he said.

 

Peter Brors is Handelsblatt's deputy editor in chief. Siegfried Hofmann is Handelsblatt's chemical and pharmaceutical industries correspondent. To contact the authors: [email protected], [email protected]