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Business Comment

Mark Leftly: New nuclear's horizons are looking brighter after Japanese intervention


Outlook Only a few days ago, the Government's civil nuclear new-build programme seemed in tatters. Horizon, a venture that plans to build plants in Anglesey and Gloucestershire for £15bn, had been dumped by German owners E.on and RWE as unaffordable; EDF's chief executive Vincent de Rivaz, who at Hinkley Point plans to build the country's first nuclear power station since the 1990s, was warring publicly with sceptical MPs.

Through all this drama, Whitehall insiders kept their cool and argued the opposite was true, that a nuclear future was close to being secured.

Turns out they might be right. Yesterday, Hitachi agreed to buy Horizon for £700m, nearly three times the amount E.on and RWE had hoped to salvage from the wreckage they caused.

The Japanese group played the situation astutely by immediately revealing that UK engineers Rolls-Royce and Babcock International will partner Hitachi, creating up to 12,000 of predominantly British jobs. Rolls-Royce might even take a small shareholding in Horizon.

"God save the Queen" could almost be heard in the background as Hitachi wrapped itself in the Union Jack with the rather Nostradamus-like pledge that it is committed to the UK for the next 100 years. Presumably, Hitachi has gambled that people will have forgotten that promise should they quit after a few profit-making decades of generating electricity on these shores.

Not many words freeze the blood like "nuclear". This programme might be civil but the debate over nuclear is not: the public still associate the word with either doomsday or, because of Chernobyl and Fukushima, virtually incomprehensible devastation.

Emphasising British involvement in the construction and operation of the stations will not end those concerns, but it does dampen them. Japanese Hitachi no more has the finger on the button than EDF, but it still feels a bit better that there are Brits keeping an eye on them. It was hardly a diplomatic response, but this was why Mr de Rivaz was correct when he warned that Tory MP Phillip Lee risked slipping into "jingoism" at the Energy Select Committee last week. Mr Lee argued that the "strike price", the government-guaranteed minimum paid for any electricity generated through new nuclear, was akin to "an annuity to the French taxpayer for the next 40 years".

Actually, that guarantee is vital as the likes of EDF, Hitachi and Spain's Iberdrola, which is umming and ahhing over a plant in Sellafield, need to ensure some return is made on the billions that they plan to spend in the UK. Otherwise, they risk going bust in a foreign land.

On Monday, The Independent revealed that EDF and the Government are close to sealing a strike price at less than £100 per megawatt hour. What MWh means would take a scientist to explain, but that figure is a good chunk less than the £140-165/MWh that had been previously feared.

New nuclear is not a certainty. EDF's partner, British Gas owner Centrica, is yet to be convinced that putting its balance sheet behind nuclear is a sage move, while Hitachi's reactor technology must go through an interminable design assessment process that could easily delay construction. Also, the pro-nuclear lobby's argument that the strike price is not a subsidy is difficult to fathom.

But those problems seem more easily surmountable than anything, be it Japanese tsunamis or retreating Germans, that has been thrown at the nuclear industry over the past two years.

Right now, new nuclear's many enemies will feel more scared of the developments of the past few days than whatever a trick or treater throws at them tonight.