RWE AG's (RWE.XE) Chief Executive Juergen Grossmann Monday gave his strongest indication yet that the utility will go to court to fight against the tax on nuclear fuel that the German government introduced at the beginning of the year.

"There's not a single reason that speaks against a lawsuit," Grossmann told Dow Jones Newswires in an interview Monday.

If the issue did go to court it would be the second time RWE has legally challenged the government's atomic energy policies in less than half a year and highlights the company's aggressive defense of its five nuclear reactors.

In April, Germany 's largest power producer by output capacity filed an appeal against a government-imposed order to shut down two of its five nuclear reactors as part of a three-month safety review that was triggered by the accidents in Japan 's Fukushima Daiichi reactors.

The tax on nuclear fuel rods was also introduced at the beginning of the year. The government projected it will generate EUR2.3 billion annually through 2016, funds it has pledged toward helping with the deficit reduction.

"We have doubts that the tax complies with European Union rules for the harmonization of excise taxes," Grossmann said.

The levy was seen as part of the price that nuclear plant operators had to pay for a broader deal to extend the operating lives of nuclear power plants by, on average, 12 years.

The government labeled the levy as an excise or consumption tax, given that it is payable on the use of nuclear fuel in power generation. But given that the power plant operators aren't allowed to pass on the additional costs to customers it looks more like an operating tax, RWE said.

The tax is payable upon receipt of a tax assessment notice after nuclear power plant operators load their reactors with fresh fuel rods. This usually happens during annual maintenance outages. RWE's Gundremmingen B reactor is currently offline for maintenance and a change of fuel rods. The outage is expected to last until the end of May.

E.ON AG (EOAN.XE)--the company's main domestic competitor--has also said it may challenge the nuclear tax. "There are many good reasons that speak for a lawsuit," Chief Executive Johannes Teyssen said earlier this month.

RWE's Grossmann Monday said the company hasn't yet made a final decision about whether it will take legal action but added that "this could happen in July".

RWE previously said that it expects the tax will hit profits by up to EUR700 million on average in coming years.

The levy came at a time when profit expectations were already souring in light of depressed power generation and gas wholesale margins and prompted RWE to prepare investors for falling profits in the next three years.

The weakened profit outlook has prompted rating agencies Standard & Poor's and Moody's to review RWE credit ratings for possible downgrades, but Grossmann said he isn't too worried about his company's credit-worthiness.

"We care about our credit ratings but this is not our only management focus," Grossmann said.

RWE has some 13,500 megawatt in new power generation capacity coming online through 2013 and all these new power plants will help improve cash flow and reduce debt, which stood at around EUR29 billion at the end of 2010, he added.

"True, over the last three years we have spent more than we generated cash. But we have surpassed the peak of our ongoing investment program, which means that cash outflows will come down in the next few years," Grossmann said.

This year and next RWE will invest around EUR7.5 billion per year and in 2013 this will come down to around EUR5.5 billion.

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