Jeremy Warner's Outlook: New nuclear build to be given go-ahead, but question of who pays is left unaddressed

Anti-Americanism takes wing in City; Still more to go for at Standard Life; Back to the future for the unlisted P&O
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The Independent Online

The Commons Trade and Industry Select Committee should perhaps have waited to see the contents of today's Energy Review - well leaked though it has been - before condemning the Government for being too swift to back the case for a new generation of nuclear power stations. Yet on one point, the MPs are undoubtedly right. The Energy Review might give the go-ahead for a new programme of nukes, but without explaining how they are to be financed - an issue unlikely to be addressed - the pledge is not worth a fig.

This is in fact the most important question of the lot, for even if planning constraints are eased and a deep repository for waste is approved, it remains highly unlikely that the private sector would finance such a high-risk form of investment without Government intervention.

The industry's insistence that no form of subsidy or market subvention would be necessary is a disingenuous one. At the very least, fossil fuel-driven sources of power generation would have to be forced to pay their proper costs for carbon emissions, to make nuclear look more competitive. And personally I doubt any new nuclear would be built without the imposition of a nuclear obligation, requiring distributors to source a minimum quantity of their needs from uranium.

Anti-Americanism takes wing in City

Lady Scotland, the Home Office minister in the House of Lords, is off to Capitol Hill on a mission to persuade the US Senate to ratify the 2003 extradition treaty with Britain. I wish her luck, for by the look of it, the US Senate is rather better at defending the individual freedoms and liberties of the people it represents than our own Parliament.

As I have pointed out before, much of the opposition in the US Senate to this treaty comes from the remnants of the once all-powerful Irish lobby, still keen to protect ageing IRA bombers from the long arm of the British law. However, it is also underpinned by a genuine concern for the rights of US citizens, which may be threatened by this ill thought-out piece of toadying to the Bush administration's agenda. Would that our own parliamentarians had been as diligent in their scrutiny when they waived this treaty through three years ago at the height of the war on terror.

Yet things are not quite as one-sided as they seem, and in getting muddled up with the case of the NatWest Three, the debate about what is undoubtedly a very bad law has become both misinformed and misleading. There is absolutely no doubt that there is some sort of a case for these three to answer in the US. Whether the treatment or justice they eventually receive is proportionate is a different matter, but if you choose to avail yourself of the opportunity of US markets, you have to expect to play by their rules. I doubt many of those who write on this matter with such high-minded passion have bothered to read the indictment, lazily preferring instead to see the whole affair through the prism of the Three's own rose-tinted spectacles.

In essence, what they are accused of is persuading NatWest to accept $1m for something Enron paid $20m for, believing this to be the price negotiated with NatWest. According to the indictment, they and their cronies at Enron then pocketed the difference. Just what are the "campaigners for justice" asking US prosecutors to do? Sweep this unseemly affair under the carpet? The evidence demands to be heard, and since the fraudulent collapse of Enron is an American affair, the US is the place to hear it.

Law-abiding business people have nothing to fear from continuing to do business in the US, but the hysteria whipped up in the British press has created an entirely different perception, one in which the British businessman can never sleep easy in his bed for fear that some vindictive US prosecutor is about to reach out and fly him, shackled, back for some Kafkaesque showcase trial in the land of the free.

Both the UK and US governments have handled the case of the NatWest Three with quite breathtaking ineptitude, and in so doing they are complicit in allowing this misguided perception to take wing. In more than 25 years of reporting on the City and business, I've never come across such visceral anti-Americanism as I see now among those who in the past have counted themselves fervent admirers of the US capitalist system. If allowed to go unchecked, I fear for the consequences. Business between our two nations will suffer badly.

Still more to go for at Standard Life

Standard Life got off to a cracking start in first dealings on the stock market yesterday, as you might expect for a company which appears to have been deliberately underpriced to ensure a positive reception. The shares immediately went to a premium of more than 5 per cent, more than justifying the judgement of the tens of thousands of customers who eventually queued up to subscribe. But is this as good as it gets, or is there further to go?

Even at 242p, the shares are trading at no more than embedded value, the industry's yardstick of comparison. Most other life assurers trade at a premium, some at a considerable one. The lesser valuation applied to Standard Life is only partially justified by the company's history as a mutual.

This admittedly is not a pretty one by the standards of the capital markets, characterised as it was by a policy of buying market share regardless of its profitability and an excessively high-risk approach to the assets of the core life fund. So reckless and wrong- headed did this become that at one stage the Financial Services Authority had severe doubts over the society's solvency.

Yet all this is water under the bridge now. The presumption has to be that Standard has learned from its mistakes. The Edinburgh insurer has had to eat so much humble pie over the past three years that the old culture must by now be fully exorcised. Can the company thrive in the intensely competitive market for long term savings that now rules?

Still a trusted brand and with excellent growth prospects in specialist areas of the market such as SIPPs, the assumption has to be that it can. And if it cannot, embedded value provides a useful floor for the shares, since this is the price - or close to it at least - which collectors of closed, "zombie" funds have been prepared to pay for alternative life assets in a number of recent deals. Standard Life must surely be worth more than that.

Back to the future for the unlisted P&O

Having only acquired P&O as recently as March, DP World is already intent on refloating it on the stock market - possibly by the end of the year, if press reports are to be believed. Even by the standards of private equity, this is a haste of almost indecent proportions. What's going on here?

The Dubai royal family, which owns DP World, is notoriously secretive in its business affairs, so we are never likely to get a precise answer, Yet at first blush this seems to be more about political prestige and the ambition of building Dubai as a viable international financial centre than value.

What's being floated isn't in any case P&O as it once was. The new company includes a clutch of other ports, including Dubai itself, which is one of the biggest container ports in the region. Even so, and despite the present investment craze for physical, infrastructure assets, it seems most unlikely that Dubai will be able to persuade international investors to pay more or the same for these assets as the fancy multiple it bought P&O for. Anything sold would be at a loss, even assuming the injection of debt leverage into the combined whole.

Why would Dubai want to do that? The main purpose, it would seem, is that of providing another listed entity for the Dubai stock market, which the emirate's rulers plan to transform into the London Stock Exchange of the Middle East. As things stand, hardly any stocks are traded there, and the few that are tend to be highly volatile. As I say, this is not about realising value. For Dubai, there are much bigger issues at stake. If giving a little of P&O away helps cement Dubai's position as a financial centre, it will seem a small price to pay.

j.warner@independent.co.uk

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