At the time, the government's plan to kill off such a key business — prompted by the Fukushima disaster of March 2011 — seemed to have spelled a similar meltdown for the top two power companies E.ON and RWE. 

But eight months after the move a flurry of broker upgrades for RWE hint at a dramatic change of sentiment. 

"RWE has turned into a restructuring story in a challenging sector environment," explained UBS analyst Patrick Hummel, adding the low valuation was one of the factors why he upgraded the stock to "buy" from "neutral" earlier this month. 

Morgan Stanley also called the group "one of the cheapest integrated utilities in Europe". 

Analysts are now arguing that RWE is a compelling new play not only because of its undervaluation but also because of better earnings prospects linked to its exposure to lignite, the brown coal that accounts for about a fourth of the country's power consumption. 

The company will also welcome a new chief executive in July, 48-year old Dutchman Peter Terium, who is widely expected to bring new energy into the operation and find further savings. 

Shares in RWE sank 45 percent and those in E.ON lost 27 percent over 2011. 

As a result RWE, which has regained 23 percent so far in 2012, currently trades at about 7.9 times its estimated earnings over the coming twelve months, less than half of E.ON's 16.8 times. 

It has also lagged the European sector at least since mid-2009, according to Thomson Reuters data, further enhancing its appeal for investors faced with difficult choices in a globally uncertain environment. 

The outlook for RWE already looks a lot brighter than just last month, when EU Energy Commissioner Guenther Oettinger likened it and E.ON to lower league soccer clubs. 
 
CARBON ADVANTAGE 

RWE now finds itself in the unusual position of being popular because of the size of its lignite business. 

The soft brown fuel, closer to peat and a greater pollutant than coal, has become more profitable since carbon prices -- which utilities have to pay for polluting the environment — have fallen more than 55 percent since mid-2011. 

Carbon prices now trade at about 8 euros a ton and analysts at Deutsche Bank see prices of 6-9 euros a ton in the first half of 2012, suggesting little room for upside movement.

By contrast, companies with higher nuclear and gas businesses — such as E.ON — are suffering from low prices in those sectors as well as the stigma of nuclear. 

Lignite accounts for 36 percent of RWE's own power production, while the share of nuclear stands at 18 percent. At E.ON, lignite accounts for just 6 percent, while nuclear power accounts for 23 percent. 

"With proportionately lower nuclear and gas output, and more lignite-fired output than E.ON, RWE is less negatively affected by lower power prices," analysts at HSBC said. 
    
BRIGHTER OUTLOOK 

Accordingly, analysts are beginning to revise up their earnings forecasts for RWE, and notch down expectations for E.ON. 

Analysts at HSBC, for example, expect RWE to raise its guidance for 2013 earnings and E.ON to cut it, when both groups present 2011 results in March. 

According to Starmine, which gives more weight to timelier forecasts and those from the most accurate analysts, estimates for E.ON's 2013 net profit have started to come down and are now seen at 3.36 billion euros ($4.46 billion). 

This may still be at the lower end of E.ON's targeted corridor of 3.2-3.7 billion euros, but it is also 4.8 percent below the mean estimate. 

Starmine still sees RWE's 2013 net profit at 2.34 billion euros, below the company's outlook for about 2.5 billion — but top analysts have markedly revised upwards their estimates in recent weeks. 

"We think RWE's 2013 net income guidance of 2.5 billion euros ... is very conservative now," UBS's Patrick Hummel said, adding the company had greater potential for additional cost savings. 

This belief rests on the fact that incoming CEO Terium has already identified 1 billion euros in additional savings, according to an internal paper.

"He (Terium) is someone who can spread a spirit of optimism," LBBW analyst Bernhard Jeggle, said. 

Conventional wisdom has it that a new coach can help soccer teams snap out of a losing streak or even lead them to the upper leagues. 

The same may yet hold true for RWE.