Nuclear sell off-gets green light

The Government yesterday approved the £3bn privatisation of the nuclear industry, which will be carried out after a controversial merger of Nuclear Electric with Scottish Nuclear.

But the electricity regulator, Professor Stephen Littlechild, is likely to react with dismay. He has told the Government he is against any further concentration in the generating market.

The combined company would have a UK market share of 22 per cent, according to Nuclear Electric, and a share of about 18 per cent in England and Wales. The headquarters will be in Edinburgh - a move intended to avert fears over job losses in Scotland and the loss of Scottish identity.

The decision, to be formally announced on Tuesday, is a bitter blow to Scottish Nuclear, which has lobbied fiercely for its independence. Robin Jeffrey, chief executive, has said between 300 and 400 jobs are at risk in Scotland in the merger.

Plans to merge Nuclear Electric and Scottish Nuclear are likely to dismay Professor Littlechild, who is against any concentration of interests in the generating market.

It is believed that the Government plans to complete the sale by next summer. Should the rumoured price tag of £2bn to £3bn be achieved, it would allow a cut of about 1.5p on the standard tax rate.

Plans for the privatisation have been revived in spite of billions of pounds of liabilities in the industry relating to decommissing and nuclear waste management. City nerves over the extent and uncertainty of these liabilities caused nuclear to be suddenly pulled from the privatisation of the electricity industry five years ago.

The main difference this time is that the Government is expected to retain Nuclear Electric's older Magnox reactors in a separate state-owned company, ring-fencing liabilities that are thought to be in the region of £9bn. Both Nuclear Electric and Scottish Nuclear have also increased their efficiency substantially and believe they can compete in the generating marketplace.

The liabilities relating to Nuclear Electric's five advanced gas-cooled reactors and the new pressurised water reactor at Sizewell in Suffolk would amount to about £6bn at the time of privatisation. Scottish Nuclear has two AGRs in operation and has liabilities of £1.8bn. About £700m of those are thought to relate to an old Magnox station, which will probably remain in state ownership.

The consensus in the City is that the Government will be able to sell the industry if the price is low enough. One analyst said: "I think they can do it but the crucial thing is what liabilities the Government will keep. This time around things are better quantified but the basic issues have not changed." He added: "The Government has set its heart on tax cuts and of they do not come from privatisations where do they come from?"

Another analyst said: "It has got to have to be on a very generous yield." He said that it was far too early to speculate on a price as investors would also be watching for the outcome of the review of electricity prices by the regulator, Professor Littlechild. There is also some nervousness that Professor Littlechild will refer National Power and PowerGen to the Monopolies and Mergers Commission if they fail to meet his demand that they sell some power plants.

Professor Littlechild, who in the past suggested that the two companies swap power stations to increase competition north and south of the border, would have the power to refer the new organisation to the MMC. This could, however, be overturned by Michael Heseltine, the President of the Board of Trade.

The Government will also announce an early end to the £1bn annual subsidy for Nuclear Electric, raised through a levy on electricity bills. The move would allow a cut of about eight per cent on electricity bills in England and Wales but would raise questions about the funding for decommissioning Magnox plants and treating their fuel.

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: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence