Outlook: No handouts, but let's end the nuclear discrimination now

TV manoeuvrings; Chocolate dilemma

The Government's Energy Review, published in February, had this to say about the future of Britain's nuclear power industry. "Nuclear power seems likely to remain more expensive than fossil fuelled generation.... Because nuclear is a mature technology within a well established global industry, there is no current case for further government support... The decision whether to bring forward proposals for new nuclear build is a matter for the private sector..." and so on and so forth. There could hardly have been a more dismissive response to the industry's claim to be the solution to Britain's energy needs. And this with Brian Wilson, one of the most pro-nuclear Energy ministers since Tony Benn, sitting there in the energy hotseat.

Unsurprisingly, shares in British Energy, the company that dares not speak its name as Britain's biggest nuclear power generator, have been in free fall more or less ever since. Just lately, the speed of the decline has accelerated, exacerbated by cuts in production targets, plant shutdowns, and the introduction of new electricity trading arrangements which appear only to confirm the view that nuclear can never match fossil fuel as a source of cheap, reliable energy. The price of electricity has fallen to below British Energy's costs of production, endangering the company's very existence. If the Government wants the nuclear industry to survive, some form of action is urgently required.

Robin Jeffrey, British Energy's chairman, insists he's not asking for state handouts, but only for a level playing field. All things being equal, he says, nuclear can remain an economically viable form of energy production. Only they are not equal. The Government's ridiculous climate change levy applies even more ridiculously to British Energy along with everyone else, even though its nuclear reactors don't produce an ounce of carbon, the emission the levy is supposed to tackle.

Bizarrely, British Energy pays 20 to 30 per cent more in business rates for its plants than comparable fossil fuel generators. It is also forced expensively to have its spent fuel reprocessed by the Government owned British Nuclear Fuels, rather than the much cheaper option of storage. Last, but not least, the new trading arrangements allow generators with domestic supply businesses to supply themselves, which means that to some extent they are protected from poor wholesale prices for electricity. British Energy has no such business.

On all four arguments, Mr Jeffrey seems to have a point. Even accepting the public interest case for maintaining a nuclear presence in the energy mix, the industry can't expect in this day and age to be subsidised. But nuclear has enough of an uphill struggle surviving as it is, without being positively discriminated against. These and other anomalies need urgently addressing.

TV manoeuvrings

The Edinburgh TV Festival has this year coincided with a period of unprecedented crisis in the British commercial TV sector. As executives reflect on the damage to reputation and liver from the weekend's antics, at least a few things have become clearer. One is that RTL is very definitely not going to sell Channel 5, to Rupert Murdoch's BSkyB or anyone else, so as to buy ITV instead. Rather, the Belgium-based broadcaster is prepared to fight tooth and nail to prevent Dawn Airey, Channel 5's chief executive, from being poached by ITV, where there is a vacancy as director of channels. To keep her, RTL is promising more money and a bigger programming budget. It even promises to go head to head with ITV, which it rightly perceives to be so demoralised and cash starved that it might even be there for the taking.

There may be no openings for BSkyB at Channel 5, but there appears to be nothing to stop Sky launching its own free-to-air, popular entertainment channel on the BBC's digital terrestrial platform. That objective could be achieved either by switching Sky One, already a serious threat to ITV, to free to air, or through a greenfield venture. Both alternatives would be hugely expensive, and for the time being Mr Murdoch can ill afford any new financial gambles. But once the economic clouds begin to lift, that may well be the game plan.

One thing is certain. The competition to ITV and Channel 4 in the free-to-air commercial market can only intensify. ITV's two leading companies, Carlton and Granada, desperately need to merge if they are to stand a chance of adequately marshalling their defences for the coming onslaught. Division and infighting continues to be ITV's most potent enemy. Regulatory obstacles to a merger remain daunting, but not insurmountable. Despite the false start earlier this year, expect movement sooner rather than later.

Chocolate dilemma

In Aztec culture, chocolate had a higher position than gold. As a result, cocoa beans were commonly used as a form of currency. A good slave, for instance, would cost 100 beans. Interesting, a woman of the night cost the same price as a rabbit – that's just 10 beans.

Judging by the astonishing $11.5bn which is reportedly being asked for Hershey, the US confectionery group, little has changed. Chocolate continues to command a premium. Even taking account of Hershey's position as the clear market leader in the United States, and the fact that assets of this type come up for sale only once in a blue moon, this would be a big price to pay, for Nestlé or indeed anyone else. It's all very well being the market leader, but the US market is as mature as mature can be. Obesity is now a bigger killer in the US than smoking and alcohol, so what would seem a relatively harmless pleasure is becoming as much a target for the health lobby as cigarettes and liquor.

The other company desperately trying to figure out whether it can make the numbers stack up is Cadbury, but for the British chocolate maker it would be even harder to justify such an outlay. The price being asked amounts to nearly 65 per cent of Cadbury's stock market capitalisation. What's more, with no kind of an existing market position in the US, the cost cutting potential wouldn't be nearly as great as that enjoyed by Nestlé.

Only on one front does Cadbury have any kind of obvious advantage, which is that it is culturally very much the same sort of company as Hershey. Both companies have their routes deep in the temperance movement of the last century and they remain to this day highly paternalistic organisations. What links chocolate and non-conformists is a bit of a mystery, but the similarities between the two enterprises are uncanny. They both built their own towns, to this day Hershey runs its own school, and the interests of employees and the local community remain paramount.

In Hershey's case, these principles have been protected by the Milton Hershey School Trust, which owns the bulk of the shares. Up until now, that is. So as to diversify and spread its risk, the trust wants to sell. The town of Hershey lives in fear of the job cuts and worse that will follow. The proposed sale has caused such a stink that the attorney general of Pennsylvania is to challenge it through the courts. As a result, there may yet be an opening for Cadbury, which might be able to pass itself off as a more suitable owner of the business than the ghastly Swiss. The trust would be left facing the age old choice between the colour of Nestlé's money and the more acceptable face of Cadbury's ownership. Perhaps regrettably, it is the cocoa beans that usually count.

jeremy.warner@independent.co.uk