Nuclear future uncertain as French deal stalls

Plans for the next generation of UK nuclear power stations faced uncertainty today after France's EDF failed to agree a takeover of British Energy. EDF, the state-controlled electricity company, had been expected to announce a £12bn deal this morning, but it said last night that "conditions for a major development in Great Britain" had not been met.

British Energy, which owns eight nuclear power plants and generates around one-sixth of the UK's electricity, said today that "advanced discussions with a party have continued but without agreement to date". Reports said the proposed deal - the subject of discussions lasting several months - broke down after two of the UK company's biggest City shareholders requested EDF put more money on the table.

British Energy, which is part-owned by the Government, is seen as a key part of plans to boost Britain's nuclear energy production. With 58 nuclear power stations, EDF is well placed to take a lead role in the development of a new generation of UK nuclear power plants.

Business Secretary John Hutton told BBC Radio 4's Today programme that the Government was disappointed the deal had fallen through. But he said ministers would work to ensure Britain still got the new nuclear power it needs. Mr Hutton said: "We are disappointed by the failure to reach an agreement overnight. I think it would have been a good fit.

"EDF are, as people know, the world's largest nuclear operator. I think it would have been a very sensible way to take forward new nuclear plans in the UK. "But ... the future of new nuclear in the UK doesn't depend on this particular deal. "It's up to the board now and EDF to see if there is any way that this gap can be bridged but I think we are absolutely committed to new nuclear power and if this deal is not able to go through for whatever reason, we will be looking at plans to make sure we can continue with our foot on the floor because Britain needs these new nuclear power stations."

Dougie Rooney, national officer of the Unite union, said: "It is time to bring this farcical British Energy sales process to an end. "The employees at British Energy are the best in the world and are more than capable of running the next generation of nuclear energy supply if given the opportunity.

"The Government must act in the interests of the employees and the entire nation. It is vital we get the new nuclear power station build programme under way in order to reduce our dependency on expensive gas and oil. "If we do not act now, this dependency will cripple the economy.

"The Government must force British Energy to make available their sites in order that international consortiums can build the next generation of power stations. "UK manufacturing can develop and become a global supply chain player for nuclear and clean coal power station new build."

Mr Rooney said unions will be seeking urgent talks with the Government. Mr Hutton said the Government had been prepared to accept the offer from EDF. "That wasn't the view of all of the shareholders and of course the Government is only a minority shareholder in this publicly listed company, so the board has - quite rightly - overall responsibility to all of the shareholders to try to find the right way forward.

"I hope that they can, I do remain convinced this is the right deal, but it's got to be acceptable to the shareholders and those are the discussions that are going on today." FTSE 100 Index-listed British Energy first announced talks with potential suitors in March.

It is thought the proposed deal with EDF involved British Gas owner Centrica taking on a minority stake of around 25 per cent in the business.

The Financial Times said EDF's offer was put to British Energy's board late yesterday, with the French group confident of winning a recommendation. But British Energy's board rejected the offer, the newspaper said. The company held talks with several energy companies earlier this year, with EDF always seen as the front-runner.

The UK Government still owns a 36 per cent stake in the business following a rescue six years ago, when plunging wholesale electricity prices brought the business to the brink of insolvency.

The FT said the failure of the EDF talks could lead the Government to revert to its back-up plan of forming joint ventures with several different energy companies to build new nuclear reactors in the UK. The East Kilbride-based company has seen its fortunes recover since the bail-out as wholesale prices recovered to current highs. Its value has also risen because of the expected development of a new generation of UK nuclear power plants.

When given the go-ahead by the Government, the new plants are likely to be built on the sites of the existing power stations, which are owned by British Energy. This would have left EDF well-placed to benefit from a nuclear building boom. EDF, or Electricite De France, had 38.5 million customers across Europe at the end of last year as well as 58 nuclear power stations.

The group began life in 1946 after the French government passed a law nationalising 1,450 power generation, transmission and distribution firms. In 2004, EDF became a publicly-quoted company although the Government owned almost 85 per cent of the shares as of the end of 2007.

British Energy's eight nuclear power stations are Dungeness B in Kent, Hartlepool, Heysham 1 and 2 in Lancashire, Hinkley Point B in Somerset, Hunterston B in Ayrshire, Sizewell B in Suffolk and Torness in East Lothian. The group, which has around 6,000 staff, also owns a coal-fired power station at Eggborough, East Yorkshire.

(By Graeme Evans, The Independent, 01/08/2008)