The auctioning off of the Government's 35 per cent stake in British Energy is reaching a predictably shambolic conclusion. As the deadline for bids came and went yesterday, only one of the interested parties, Electricité de France (EDF), had submitted a firm proposal. RWE of Germany and Iberdrola of Spain, both of which have been struggling with consortium bid proposals, failed to step up to the plate.
Yet that doesn't mean they are out of the game. Now that some kind of benchmark has been set by EDF, others are being reinvited to counterbid. Part of the problem is that nobody yet knows precisely what they are dealing with.
There are competition issues involved in buying British Energy for all three of these players. Nor has the Government yet been clear on the degree to which the successful bidder would be obliged to agree to "co-siting", that is allowing rivals to build nuclear plants on the same sites as British Energy. Both these issues have a crucially important bearing on price. Yet getting clear-cut answers is like trying to nail a blancmange to the wall.
Anyone coming to this story for the first time would be immediately struck by the absence of any British bidders for this key strategic asset. British Energy owns all of Britain's remaining nuclear power stations and, given that any new ones are highly likely to be built on the same sites, has a vitally important role to play in the country's nuclear future.
In fact, there is a British player that would dearly love to acquire British Energy, the gas and electricity retailer Centrica. Yet it doesn't have the balance sheet strength for a cash bid, nor probably the financial clout for new nuclear build. Even so, the Government has again missed a trick in not backing the suggested all-shares merger with Centrica, thus ensuring that a British company remains firmly in the driving seat of our nuclear future.
It scarcely needs saying that nowhere else in Europe would this have happened. With energy security now widely regarded as almost as important as physical security, everyone else has been busy building national champions in the energy arena to defend their long-term interests. Britain's deregulated energy markets allow continental companies to shop with impunity for assets in Britain, yet it is virtually impossible for British companies to make significant headway on the Continent. It's hard enough to gain entry even as a humble supplier, let alone buy the crown jewels of our rivals' nuclear industries.
On the whole, I'm not a believer in the national champion argument, yet, quite apart from issues of energy security, there is a good commercial case that can be made for the Centrica/British Energy combination. At a time of strongly rising fossil fuel prices, nuclear provides one of the few viable sources of fixed-cost energy supply, and can thus provide an important hedge for Centrica against the exorbitant demands of overseas gas and oil producers.
Favouring Centrica doesn't mean shutting the continentals out. Co-siting rights would ensure fair competition in new nuclear build. But this is all water under the bridge now. As it is, the prize is likely to go to the state-controlled EDF. I'm sure the French Government will look after our energy needs just fine, but no other European country would take so much on trust.Reuse content