James Moore: Nuclear power may not look cheap now, but there are other benefits

Outlook. Also: Hedge funds and retail investor campaigns  have brought about a volte face at Co-op

James Moore@JimMooreJourno
Tuesday 22 October 2013 00:29

Welcome (back) to the nuclear future. The Government pushed the button yesterday, announcing a deal for the first new plant in a generation with the help of France’s EDF Energy and other overseas investors.

The price? Electricity, when the plant comes on stream, at roughly twice what it costs today. A price which has been guaranteed to the investors.

If only we could use the heat of controversy to power turbines, because that fact has generated enough to keep the country going over the next decade, during which old coal plants will go offline without anything to replace them.

What the critics don’t know, however, is what electricity prices will look like by the time the new plant is turned on. What has been guaranteed now could actually seem like a very reasonable price then.

It is true that some people get excited about a wave of supposedly cheap energy that could be produced from natural gas released through fracking. But those who live next door to where it’s supposed to take place get even more excited. And not in a good way.

Fracking aside, even at the agreed price nuclear is still considerably cheaper than other low carbon alternatives: offshore and onshore wind, for example. It’s also more reliable.

Despite the fuss over recent price rises, we’re still enjoying relatively cheap electricity by European standards. The problem is we haven’t been investing. As a result, those rises may be just the start of it, regardless of what Ed Miliband would have you believe.

That isn’t to ignore the environmental issues, and the potential risks of nuclear. And I am wholly in favour of research and investment into renewables. I am equally in favour of boosting this country’s energy efficiency – cut demand and you need less of a supply – through, say, offering tax breaks or grants to householders and businesses.

But it chills me that we live in a country where people are facing the choice of food or fuel. Unless we act, more and more people are going to find themselves facing that evil dilemma.

Nuclear might not look all that cheap today, but it is part of the solution and comes with the substantial spin-off benefits of producing lots of high quality jobs in the construction phase. The economy could certainly do with the power that they’ll provide.

Co-operative it may be. But ethical?

After telling everyone who cared to listen that there was no plan B for the Co-operative Bank, now, it seems, there is.

Initially bondholders were told they would have to accept their holdings being converted into shares amounting to 25 per cent of a recapitalised bank that would be majority owned by the Co-operative Group. Or the alternative was to wind the thing up.

Now, following sustained pressure from hedge funds, not to mention the doughty efforts of Mark Taber on behalf of retail bondholders, there’s been a volte face such that Co-op will get something like 30 per cent. Not plan B, Co-op people say, more like A plus. Or perhaps A starred. What next? AAA?

Actually that might be pushing it a bit far. There’s nothing AAA about this. Trading in Co-op bonds was suspended yesterday pending a further announcement which will presumably fill in details that were notably lacking.

Trust us, the Co-op is saying, we’ll see the retail bondholders right. Meanwhile the hedge funds and City investors who look set to get the majority of the shares in the institution will jolly well have to behave themselves, because this will still be the “ethical” bank. See, it’s being written into the constitution.

This is supposed to reassure those who hold the view that “hedge fund” and “ethical” are mutually exclusive terms. Most of the Co-operative Bank’s customers have remained remarkably loyal to a business that hasn’t done much to deserve it.

Whether they will stay on board now is open to question. Co-op Group, with its 30 per cent share, can argue that it will still have de-facto control. And this is true. Not only will it be the biggest individual shareholder, it in effect holds the whip hand.

It’s just that it’s very hard to trust Co-op as the guardian of a bank’s ethics given the recent history. And that includes the last few months, when it told everyone who cared to listen that the first offer was the only game in town…

The new bank regulator has done its job

One thing to be thankful for is that the Co-operative Bank won’t call upon the taxpayer’s purse.

That counts as a victory for the Prudential Regulation Authority, even if the way the episode has been handled has been criticised in several quarters. The Co-op has been a test case for its new regulatory set up, and it has done its job.

Assuming the deal announced yesterday doesn’t hit any further bumps in the road, attention should now shift to the Financial Conduct Authority.

The fact that the Co-op won’t be a burden on the state shouldn’t be allowed to detract from what has been an appalling scandal that has left thousands of individual bond-holders out of pocket while tarnishing the name of one of Britain’s best loved brands.

The Treasury Select Committee has picked this one up as part of its investigation into Co-op’s failed attempt to buy Verde from Lloyds. Peter Marks, former Co-operative Group chief executive, gives evidence today.

It wouldn’t do much for the FCA’s credibility were the committee eventually to produce another report questioning why it had failed to pursue those responsible for another scandal.

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