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The German consortium planning to build new nuclear plants in the UK is negotiating a cash injection of up to €5bn in exchange for a 25 per cent stake, according to people familiar with the situation.

The talks underline the scale of the financial challenge behind the UK’s ambition to build a new generation of reactors.

Eon and RWE, which together form the Horizon consortium, are currently evaluating rival offers to provide the reactor designs for the plants from Toshiba of Japan, which owns Westinghouse, and France’s Areva.

The proposal for an equity stake was raised during a series of meetings between the German utilities and Toshiba in London and Düsseldorf from July to discuss the financing of the project, according to people familiar with the talks. One industry source said similar discussions had taken place with Areva.

A third person confirmed the proposal had been discussed as a means of reducing RWE and Eon’s exposure to the project in the wake of the Fukushima disaster in Japan.

“Ideally, every nuclear power station is meant to run for about 40 years, so your risk profile changes for the worse with every event that could threaten that kind of lifetime,” said the person briefed on the matter.

Energy companies are weighing the risk of the UK plans falling behind schedule or, in extremis, a future British government reducing its support for the programme. The Fukushima disaster has already imposed a delay on the UK’s plans, with a new timetable for the first new reactor due to be published later this year.

Both Toshiba and Areva submitted final bids last month. One person close to the consortium stressed the equity element of the proposal had “always been an option in the original tender documents” and had been put forward by one of the bidders. “It is not a prerequisite for the winner,” the person added.

A cash injection would nonetheless help the strained finances of RWE and Eon, which are facing mounting costs as a result of Germany’s decision to phase out nuclear power by 2022. Eon in August announced its first quarterly loss and pledged to cut costs by €1.5bn every year until 2015. RWE, burdened by net debt of €27.5bn, has promised €11bn of asset sales by 2013.

The Horizon consortium is a crucial component of Britain’s ambition to build a new generation of nuclear power stations. Of the new reactors planned in the UK, the consortium plans to install between four and six.

Two or three would be constructed at Wylfa on the Welsh island of Anglesey, where current plans provide for the first to come into service in 2020. Horizon also intends to construct two or three new reactors at Oldbury in Gloucestershire, with this facility coming into service in about 2023. If all goes according to plan, the consortium would account for about 30 per cent of the UK’s total nuclear generating capacity.

RWE and Eon headquarters in Germany declined to comment, as did Eon in the UK, citing confidentiality. Toshiba declined to comment, as did Westinghouse in the UK. A spokesman for Project Horizon also declined to comment.

Copyright The Financial Times Limited 2017. All rights reserved.
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