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British Energy Lacking Suitors

Posted in Generation,Nuclear by Cheryl Morgan on the May 13th, 2008

So British Energy has been put up for auction, and they got only one bidder. Ah well, that’s better than when the UK’s electricity industry was first privatized. Then no one wanted to buy the nuclear plant.

But what to do? For that lone bidder is not a safe and reliable British company, but rather a dastardly Frenchman! Well, Electricite de France (EdF) does know rather a lot about running nuclear power stations. It is not surprising that they are interested. But the British public, quite understandably, is nervous about selling such high profile resources to Johnny Foreigner.

The Daily Telegraph reports that the government is unwilling to sell the entire portfolio of 8 plants to a single company. At best, the paper says, EdF would be allowed to buy 6 of the plants, leaving the way open for another company to buy two. The Telegraph also reports that Rothschild, the company running the auction, is will to accept late bids filed this week.

Other pundits have taken a slightly different tack. According to City AM, EdF has only offered £7 ($14) per share, a figure well below the government’s desired selling price. The story quotes Lakis Athanasiou of Evolution Securities as valuing the company at around £10p ($20) per share.

Over at The Independent, Jeremy Warner makes the case for Centrica as the potential savior of British national security. Unfortunately, as Warner notes, the company has not been doing well of late (see Forbes); and it seems unlikely that Centrica could outbid a determined rival. The BBC reports that Centrica is considering a bid, but only in conjunction with another company.

But what of EdF themselves? It appears that they are not taking any chances with potentially capricious politicians. An article in the Financial Times (quoted here by Bloomberg) reports that the French company has been buying up land close to two of the British Energy sites: Wylfa on the island of Anglesey, and Hinckley Point in Somerset. After all, the point of owning British Energy is not to get control of 8 aging nuclear plants that will have to be decommissioned soon. It is to get in on the ground floor of the new boom in British nuclear generation that everyone assumes must be coming because the UK has made very little progress towards introducing renewable generation and nuclear seems to be the only option for avoiding a substantial increase in carbon emissions. Those new plants will find it easiest to get planning permission if they are to be sited at existing nuclear sites. But they could equally be built on the sites of old plant that is being decommissioned or, as EdF appears to be betting, on land that is close to existing stations (and therefore close to existing transmission infrastructure).

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