EDF deal boosts nuclear power station plans

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The Independent Online

Government plans for a next generation of nuclear power stations were boosted today after French group EDF unveiled a £12.5 billion deal to buy British Energy and build four new reactors in the UK.

The deal will net the Government more than £4 billion for its 36 per cent stake in British Energy (BE) and will kick-start a wave of new UK plants.

EDF - majority-owned by the French government and the world's biggest nuclear power provider - said it wanted to construct and operate two reactors each at existing BE sites at Hinkley Point in Somerset and Sizewell in Suffolk.

The group is also in talks to sell a 25 per cent stake in the new British Energy to British Gas parent firm Centrica, which wants to secure a power-sharing arrangement once the takeover is complete.

The deal, which is one of the largest ever direct foreign investments in Britain, will see EDF pay 774p a share - 9p higher than the price offered in July, which was rejected as too low by major British Energy shareholders.

Prime Minister Gordon Brown welcomed news of the takeover as "good value for the taxpayer and a significant step towards the construction of a new generation of nuclear stations".

He added: "Nuclear is clean, secure and affordable. Its expansion is crucial for Britain's long-term energy security, as we reduce our oil dependence and move towards a low-carbon future."

EDF's planned new reactors have the potential to generate electricity to meet more than 13 per cent of the UK's forecasted energy demand by the early 2020s, saving more than 14 million tonnes of CO2 emissions a year, according to the Government. The first of the reactors could come on stream by the end of 2017, it added.

But the Government has stressed that it wants other players in Britain's nuclear power industry and EDF has agreed to sell BE-owned land to other potential nuclear operators should its new reactors receive the all-clear.

The agreement covers land surrounding the sites at Bradwell, Essex, and either Dungeness, Kent, or Heysham in Lancashire.

British Energy employs 6,000 staff and produces around a sixth of the UK's electricity.

Unions welcomed the announcement and the prospect of new jobs being created in the nuclear industry.

Gary Smith, national officer of the GMB union, which represents thousands of workers in the nuclear industry, said: "At long last, one of the pieces is in place to secure an energy future for Britain.

"We look forward to having a constructive dialogue with EDF regarding the building of much-needed nuclear facilities on British Energy sites."

Dougie Rooney, national officer of Unite, added: "We welcome the end of a long sales process. EDF was the only potential purchaser. Our job now is to ensure that EDF keeps the existing plants open and maintain or improve investment."

However, the deal was slammed by anti-nuclear campaigner Greenpeace, which it said would do nothing to promote UK energy security or tackle climate change.

Nathan Argent, head of Greenpeace's nuclear campaign, said: "Just yesterday Gordon Brown promised the UK a million green-collar jobs in the manufacturing sector, but his push for nuclear power has led to a deal which will benefit the French taxpayer and create French jobs."

British Energy chairman Sir Adrian Montague said his company spent the last six weeks working with EDF to secure the new terms and seal a deal.

He told the BBC: "This new transaction is regarded by the board as good for the shareholders, good for our staff, good for the nuclear industry and also good for the country."

EDF said both the Government and British Energy's largest shareholder, Invesco, had given their backing for the offer.

It is understood that the July offer from EDF was scuppered by opposition from institutional investors such as Invesco, which owns a 14.9 per cent stake and is said to have argued that the price undervalued BE at a time when the value of energy assets was rising.

Oil's slide from July's peak of 147 US dollars a barrel is thought likely to have persuaded some investors to be more flexible over price demands.

But the deal will need the approval of remaining shareholders, including institutional investor M&G.

Should shareholders and regulators give EDF's takeover the green light, the sale is expected to go through by the end of this year or early next year.

EDF plans to build longer-lasting EPR reactors in the UK, which are a type of pressurised water reactor, similar to those already in operation in nuclear industry-reliant France.

They are believed to last for 60 years compared with the normal 40-year lifespan.

Centrica said it was hoping to take part in EDF's new nuclear builds in the UK under negotiations to take an investment in the new BE.

It is also looking to secure a deal to take at least 25 per cent of the energy output from BE's existing fleet of stations.

British Energy's eight nuclear power stations are Dungeness B in Kent, Hartlepool, Heysham 1 and 2 in Lancashire, Hinkley Point B in Somerset, Hunterston B in Ayrshire, Sizewell B in Suffolk and Torness in East Lothian.

The group also owns a coal-fired power station at Eggborough, North Yorkshire.

A number of contenders are now thought to be lining up to bid for the land to be put on the sale block by EDF, with land owned by the Nuclear Decommissioning Authority (NDA) also up for grabs.

Utility giant EON is seen as a front-runner to build new reactors in the UK, as is nPower's German owner RWE, which is thought to have been involved in early bidding rounds for British Energy. Both groups declined to comment.