For sale: Minority interest in a core plan of £ 20 billion that is not planned. The risks include large overruns in cost and budget, political intervention and a prudent customer base. One current owner, China’s CGN; a legacy of the country’s short-lived existence golden decade of cooperation with the UK.
British plan to achieved a 20 percent stake is ambitious in the proposed Sizewell C nuclear plant in Suffolk. It can take a decade or longer to build nuclear plants; construction time has increased twice in the last half century, according to researchers at Imperial College London.
France’s EDF, owner of the remaining 80 per cent of Sizewell C, does not need academics to tell it. Earlier this year it was (again) reviewed cost and timing on Britain’s Hinkley Point C. Finland’s Olkiluoto 3, which started in 2009, is still idle 12 years later.
An initial public offering – one option argued by ministers – could not fly in the storm of uncertainties. To risk the NewCo (or perhaps the NukeCo) at an acceptable level for public markets, taxpayers need to reverse the cost overruns and subsidize power. They will also have to bear the dismantling costs, already £ 135 billion. liability.
Traders or even a deep pocket in their own pocket are likely to take a minority stake in such a controversial industry. This leaves infrastructure funds. They, too, have walked away in the past. A £ 6bn report for aging plants in the former British Energy has exploded rapidly. But a risk-sharing structure – just like the former private finance initiative – can win it.
Creating a regulated asset base, one option on the table, has previously been successfully deployed. Airports and the new sewer in London are supported by the model, which makes financing possible during the construction phase.
But such schemes have flaws. Thames Tideway, which faces a pandemic-inflated bill, wants to increase Londoners’ water bills to make up the slack hole. The airport at Heathrow could not take full advantage of the RMB proposed third runway. A look at recent headlines shows that the input is even higher with electricity. Increase it again for nuclear power. It requires strong guarantees. Infrastructure funds are typically targeted at gross IRRs of 12 to 14 percent; renewable energy provides less than half of it.
Previous foreign investors, including Toshiba and Hitachi, have let British nuclear power down. British hostility towards China seems to CGN from its own exit, leaving taxpayers holding the baby.