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British Energy, the UK nuclear power company, is still likely to be sold to France’s EdF because of the strong political imperatives for a deal, despite the near-collapse of the deal recently, said people familiar with the process.
A person close to the deal last week reiterated that EdF remained the only serious contender for the company, despite the British Energy board rejecting the latest EdF bid - believed to be valued at around 765p per share - even when EdF had gone so far as to schedule a press conference to announce the purchase. This rejected bid would have valued EdF at around GBP 12bn.
A former British Energy shareholder noted the very strong political imperatives for a deal. These include the fact that planning laws in the UK dictate that any new nuclear power plants effectively must be built on existing nuclear sites and that British Energy already owns the vast majority of existing nuclear sites, he said. He also pointed out that the UK would suffer serious power shortages if new nuclear plants are not built to replace the current fleet of nuclear stations that provide around 18% of the country’s electricity.
An executive at one of the country’s largest independent power providers was even more blunt, noting that the “UK government needs nuclear power in order to maintain any security of supply.” The executive was, however, highly critical of the way the government has so far handled the auction process, saying that the government has simply washed its hands of the process, “praying that the French government, in the hands of EdF (85% state-owned), can deliver what it clearly cannot.”
The UK government is still the largest shareholder in British Energy, with around 35% of the company, which is held in the form of the monthly “cash sweep”. Under this arrangement, around one third of British Energy’s monthly revenues go into a fund, the Nuclear Liabilities Fund (NLF), dedicated to the clean-up of nuclear waste in the UK market. The former British Energy shareholder cited this as another potential reason why the impetus for a sale to EdF was still strong, noting that the original government intention for a sale had been to invest the money going into the NLF as a whole into a more diverse set of potential investments. The individual added that the other option of a break-up of British Energy’s sites into a series of smaller joint ventures would not achieve this aim.
Press reports over the weekend, however, suggested rival UK firm Centrica plans to offer GBP 4bn in cash for the UK government’s 35% stake in British Energy. Centrica is dismayed by the government’s opposition to a deal involving Centrica, and believes that a cash bid might prove attractive to the government.
A spokesperson for the Department for Business, Enterprise and Regulatory Reform (BERR) noted that the government still regarded EdF as its preferred bidder for British Energy. The spokesperson stressed that the government’s principle objective was to get the new nuclear build process underway as soon as possible and an outright acquisition of British Energy by EDF was the best way to achieve this.
British Energy and EdF declined to comment.
The only other effective option for the government to achieve new-build would be for utilities to build on sites currently being sold by the government’s Nuclear De-commissioning Agency (NDA). This news service understands that the announcement of preferred bidders for several NDA sites had been intended to be announced simultaneously with the EdF deal last week, but was then delayed because of problems over the sale of one plant that is jointly owned by the NDA and British Energy: Hinckley Point in Somerset.
In any event, the NDA sites are fragmented and there are not that many viable potential areas, and so do not represent an alternative to the British Energy sites for large-scale nuclear new-build, said people familiar with the process.
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