EDF still has nuclear ambitions for Britain

French power giant EDF today confirmed its ambition to play a leading role in Britain's nuclear industry, despite the dramatic collapse of a £12bn takeover deal for British Energy in the early hours. EDF chief executive Pierre Gadonneix said this morning: "I confirm our ambition to be a major actor of the nuclear rebirth in Britain. We have been working on that for three years and we have taken measures to reach this target." But he added that "financial conditions" were not there yet for a move into Britain, which would have been the company's biggest foreign foray to date.

The deal was scuppered at the last minute by leading private shareholders of British Energy, which is 35% owned by the government. It is thought that Invesco, which owns a 15% stake, and M&G were holding out for a higher price because of the surging cost of fuel. This led to a shock announcement from EDF, the world's largest nuclear power generator, in the early hours that it had backed out of the takeover deal for the UK nuclear power operator. The company, which is 85% owned by the French government, had been expected to announce details of the bid today.

It put out another statement mid-morning, confirming that "it has been in advanced discussions with British Energy. There can be no certainty that the discussions will lead to an offer being made for British Energy. A further announcement will be made when appropriate."

EDF referred to an earlier stock exchange announcement from British Energy this morning that "advanced discussions with a party have continued but without agreement to date," leading to a sharp drop in its share price. The stock dropped 32p to 697.5p this morning, a fall of 4.4%, while EDF shares were down 0.66% in Paris.

Business secretary John Hutton said: "We are disappointed by the failure to reach an agreement overnight. I think it would have been a good fit." He added: "It's up to the board now and EDF to see if there is any way that this gap can be bridged."

The bid is thought to have taken the form of either a cash-only deal worth 765p a share, or a cash option worth 700p a share plus shares. It would have netted the British government around £4.6bn, to be used for the clean-up of Britain's nuclear power stations.

The collapse of the deal is a blow to the government's strategy of encouraging nuclear new build in Britain. However it does have other options. EDF may return to the negotiating table or British Energy's recalcitrant shareholders may be prepared to withdraw their opposition. Even if a bid does not emerge British Energy may be prepared to sell individual sites, or lease them, for nuclear new build. Nor is it the only organisation with nuclear sites. The Nuclear Decommissing Authority owns Britain's Magnox reactor sites which could prove suitable for a new generation of reactors, with the NDA's Wylfa plant in Anglesey seen as a likely contender.

British Energy operates one coal-fired and eight ageing nuclear power stations, including Hinkley Point in Somerset, Torness near Edinburgh and Dungeness in Kent. Together, they produce one sixth of Britain's electricity. Centrica, the owner of British Gas, had also been expected to take part in the deal by acquiring a 25% stake in British Energy from EDF. EDF reported a bigger-than-expected 2% rise in half-year core earnings.

(By Julia Kollewe and Mark Milner, The Guardian, 01/08/2008)