Nuclear power becomes a rushed sale

The Commons Trade and Industry Committee and the Government's advisers on nuclear privatisation appear to be speaking two entirely different languages. Both, in their own ways, are right.

The Labour-chaired committee is talking politics. It is scandalised that the Government is planning to sell British Energy for less than the pounds 2.8bn cost of one of its nine power stations, Sizewell B. As a result, the latest draft of its report recommends keeping Sizewell B out of the initial flotation, rather than selling it at an embarrassing loss.

The advisers, in contrast, talk the language of corporate finance.They do not dispute the fact that British Energy is probably worth less than the cost of Sizewell B alone. But they respond with blank incomprehension to the committee's concern.

Have those daft MPs not heard of sunk costs, ask the advisers? "What you have spent in the past you have spent in the past," BZW told the committee, in a statement of the blindingly obvious. The assets are worth what they will fetch on the market, not what they cost. Furthermore, the idea of selling the other eight elderly power stations by themselves is plainly a nonsense. Sizewell B, a modern power station with a long life remaining, is an essential sweetener, without which nuclear privatisation is a complete no-hoper. British Energy would then be a company with a decent cash flow and the ability to pay steadily rising dividends so - other things being equal - it ought to be marketable as a conventional utility.

Everything has its price and British Energy clearly has one. The problem is that even with Sizewell B, it is so low that it becomes hard to see how the taxpayer and the consumer will gain from this bottom-of-the-barrel privatisation. In terms of efficiency - usually by far the best argument for privatisation - there are very few cost savings to come, because the British Energy workforce is already low. The other standard argument, that privatisation is the only way to bring new investment into British Energy, has been demolished by the decision not to build any more nuclear power stations.

The taxpayer and the economy as a whole would be better off if the Government kept British Energy's strong future cash flow from electricity sales inside the public sector, benefiting the public finances. Instead, we are getting a rushed sale ahead of an election, verging on a forced one. Investors are going to exact a heavy price for it.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Admin Assistant

£12000 - £15000 per annum: Recruitment Genius: An expanding Insurance Brokerag...

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders