RWE npower and E.ON abandon nuclear plant development

The Government's plans for a nuclear-power renaissance were in disarray
tonight after two of the "big six" energy giants pulled out of a venture
to build new reactors.

The decision by RWE npower and E.ON not to go ahead with developing nuclear power plants at Wylfa in North Wales and Oldbury-on-Severn, Gloucestershire, threatened the creation of thousands of jobs and undermined UK energy policy, it was warned.

The two German-owned companies said they were looking for a new owner for their venture Horizon Nuclear Power in the light of financial constraints.

The venture was hit by the global economic crisis and Germany's decision to phase out nuclear power in response to the disaster at Fukushima following the Japanese earthquake and tsunami last year, as well as the significant costs of the project.

But the two firms insisted their joint venture company Horizon Nuclear Power's projects were viable for another investor to develop nuclear sites.

They also confirmed they were committed to investing in energy schemes in the UK, including renewables and gas, which have shorter payback times on capital investment than nuclear build.

The latest withdrawal from nuclear new-build comes after Scottish and Southern Energy announced last year that it was pulling out of the NuGeneration joint venture to build a new plant at a site near Sellafield, West Cumbria.

The Horizon project at Wylfa, on Anglesey, is one of the most advanced of the plans for a fleet of new reactors which the Government believes is necessary to cut carbon emissions while keeping the lights on in the UK.

The £10-£15 billion project would have created 5,000 construction jobs.

Unions reacted with dismay to the news that E.ON and RWE npower were not pushing ahead with their plans.

Gary Smith, of the GMB union, said: "This is a devastating blow which leaves the UK Government energy strategy in tatters."

Unite urged the Government to get the Horizon project back on track, saying it had the potential to bring £3 billion into the UK supply chain, sustain the Springfields Fuel Plant in central Lancashire and safeguard more than 1,000 existing jobs in addition to creating thousands of new posts.

But environmental groups seized on the news as evidence that nuclear power, which provides just under a fifth of UK electricity supplies, was not a financially-viable option for the country's future energy mix.

They called for the Government to back renewables, which they said had the potential to create thousands of jobs, supply households and businesses with clean, safe and affordable electricity, and tackle climate change.

The Government has given the go-ahead for a new generation of nuclear power plants as a key part of its energy strategy.

The move aims to replace and expand on the current fleet, which will mostly be shut down by 2023, at eight sites adjacent to existing reactors.

In a bid to make the UK more attractive to investors, ministers are reforming the electricity market to introduce long-term contracts that would pay a steady rate of return for energy over the lifetime of new low-carbon generators.

The reform aims to overcome the high capital cost of building nuclear power plants or offshore wind.

E.ON and RWE npower acknowledged that the Government was putting a framework in place to support low carbon power and said their decision was made independently based on global concerns.

Tony Cocker, chief executive of E.ON UK, said: "E.ON has decided to focus its investment in the UK on other strategic projects that will allow us to deliver earlier benefit for customers and our company, rather than the very long-term and large investment new nuclear power calls for.

"Our commitment to the UK remains as strong as ever and as our track record shows, with over £1 billion of investment in the last year alone, we will continue to select the right projects in which to invest."

Volker Beckers, chief executive of RWE npower, said: "We remain convinced that Horizon's development projects represent excellent sites for new nuclear power stations in the UK,", adding that nuclear had a key role to play in the UK's energy mix.

Despite the "disappointing" setback, Energy Minister Charles Hendry insisted: "The UK's new nuclear programme is far more than one consortia and there remains considerable interest.

"Plans from EDF/Centrica and Nugen are on track, and Horizon's sites offer new players an excellent ready-made opportunity to enter the market."

Vincent de Rivaz, chief executive of EDF Energy, said the power giant's partnership with Centrica would continue, with a final investment decision on the UK's first two new nuclear reactors at Hinkley Point, Somerset, at the end of 2012.

"We are determined to make UK new nuclear a success," he said.

PA