The UK’s nuclear future is again under a cloud this morning, after news emerged that two of British Energy’s biggest shareholders have blocked a £12bn offer from French utility firm EDF. It looked to all intents and purposes like a done deal – but it turns out that Invesco and Prudential (who together control 22% of the shares) felt that the 765p-a-share bid was too low, given the ongoing escalation in energy prices.
It remains to be seen whether the deal can be resurrected somehow, but nobody seems terribly hopeful – not least because EDF was reluctant to go above 700p-a-share in the first place. All the French company said this morning was that ‘the conditions for a major development in Great Britain are not met to date,’ which is presumably a polite way of saying that BE wasn’t willing to sell itself for a sensible price.
The eleventh-hour collapse of the deal is a major blow to the government, for two reasons. First, the £4bn windfall it would have received from the sale of its 35% stake would have been a serious boost for the Treasury’s coffers – at a time when the cupboard is so bare that the Prime Minister is giving serious consideration to abandoning his much-vaunted fiscal golden rules.
But the more serious issue is that we desperately need to start building new nuclear power stations if we’re going to have any hope of meeting our own energy needs and hitting our carbon emission targets in the coming decade. Most of British Energy’s eight existing plants are approaching the end of their nuclear shelf life – but since it will be tough to get planning permission to build new ones anywhere else, their sites are critical to our nuclear future (which is precisely why EDF – the world’s biggest nuclear power producer – was so keen to buy it, of course).
The government has been a very vocal nuclear supporter, but it knows that British Energy can’t afford the level of investment required to build new power stations while decommissioning the old ones. So it had a lot riding on this EDF deal, in every sense – its sudden collapse will be a serious embarrassment, and could set our nuclear programme back by years.
On the other hand, it was always a controversial sale. EDF is 85%-owned by the French government, so it would leave the UK in the strange position of having its future energy supply effectively nationalised by the French government (although Centrica was expected to take a 25% stake). Some people think our nuclear power stations are so strategically important that they should never be foreign-owned (and to be fair, you can’t imagine the same thing happening in many other countries). Others objected to the idea of selling off yet another industry in which Britain used to be a world leader.
And perhaps the Prime Minister should look on the bright side. If he’s not going to get his £4bn, at least he can avoid the row about how to spend it...