Page last updated at 07:09 GMT, Wednesday, 24 September 2008 08:09 UK

EDF completes UK nuclear line-up

Analysis
By Jorn Madslien
Business reporter, BBC News

Less than two months after British Energy shareholders walked away from an earlier deal, EDF has bagged the UK nuclear power generator in a £12.4bn deal.

Sizewell B nuclear power station
Britain's nuclear future is expected to be dominated by French firms

Selling British Energy to EDF is about more than just a handover of physical assets.

The deal also completes the line-up of participants in a nuclear race that will lead to the creation of two essentially new branches of Britain's nuclear industry.

One is needed to clean up the mess left behind after half a century of nuclear weapons and energy production.

The other is getting ready to build an entirely new generation of at least eight nuclear reactors, after the government gave the go-ahead for the rebirth of the nuclear industry early this year.

"The role for nuclear new-build as an integral part of UK energy policy is now firmly established," according to British Energy's chief executive, Bill Coley.

National asset?

Both clean-up and new-build will create thousands of jobs in the UK, paid for by a mixture of government cash, income from existing and new operators, and investment by the financial sector.

The expertise of our people, together with our sites, makes British Energy uniquely positioned to play a pivotal role in nuclear new build
Bill Coley, chief executive, British Energy

And if British Energy is eventually sold to EDF, both clean-up and new-build will be dominated by large French companies, which are themselves controlled by the French state.

Such a prospect has alarmed critics who question whether it makes sense to transfer this much control from the British to the French government, though there are also many who insist it is not only eminently acceptable but also hugely desirable.

French ambitions

EDF's acquisition of British Energy is at the heart of French commercial nuclear ambitions in the UK.

Tricastin Nuclear Power Centre in Bollene, southern France
Contamination from the Tricastin plants has given opponents ammunition

British Energy is the main player in the UK's nuclear industry. Its eight existing nuclear reactors, which currently generate some 14% of the domestic electricity supply, will provide EDF with an income as it sells the electricity generated by the plants to its existing retail customers.

And as can be seen from recent hikes in electricity prices, this is a valuable commodity in its own right, and an asset that will benefit EDF's UK partner Centrica, which is set to acquire a 25% stake in British Energy.

But far more important are the strategic benefits of the takeover.

The next generation of nuclear generators will most likely be built on existing sites owned by British Energy.

Dungeness in Kent, Sizewell in Suffolk, Bradwell in Essex and Hinkley Point in Somerset are among the most likely sites for new-build, according to industry insiders.

"The expertise of our people, together with our sites, makes British Energy uniquely positioned to play a pivotal role in nuclear new-build," according to an earlier statement by Mr Coley.

Hence, ownership of British Energy would give EDF considerable market power, which in turn would make it a natural front-runner when the UK government decides who should build the new reactors.

Clean-up contract

The other side of the equation is made up by EDF's commercial partner, Areva of France, which has already entered the UK nuclear industry through the clean-up operations.

HAVE YOUR SAY
Nuclear was always the future - as long as EDF does indeed spend the money needed it should be welcomed.
Philip Charles Le Roux, Aldershot

Areva, which is expected to construct the reactors that EDF wants to build in the UK, is also the lead member of Nuclear Management Partners, a consortium that also includes Amec of the UK, and URS Washington Division of the US.

In July, Areva and its partners were named preferred bidders to decommission the sprawling medley of waste stores and old reactors at Sellafield, a contract worth some £6.5bn over a five-year period.

Nuclear Management Partners won the contract ahead of rivals such as Fluor, Babcock & Wilcox, Bechtel, Serco and Toshiba.

A possible extension of the contract until 2025 would make the deal worth more than £22bn.

When measured by volume, some 65% of Britain's nuclear waste is stored at Sellafield in Cumbria, but when measured by its radioactivity some 95% of the UK's nuclear waste is stored here. Hence, this is where most of the vast and growing clean-up budget will be spent over the next decades.

Enormous investment

Dungeness
Dungeness is among the nuclear reactors destined for closure

Given the sums that are being piled into both clean-up and new-build, it might make more sense to talk about two separate nuclear industries in the UK.

The clean-up industry alone is set to attract at least £100bn over a 75-year period, including the cost of treating the waste from the nuclear weapons industry.

The cost of decommissioning, reprocessing and storing the waste accumulated by the UK's civilian power generation industry over the years accounts for more than three-quarters of the total clean-up costs - or £83bn, less an expected income from reactors that are still operational of some £10bn.

The work includes the gradual closure of existing reactors over the next 15 years, and their subsequent decommissioning, as well as the reprocessing of 470,000 cubic metres of existing nuclear waste, which is currently stored above ground at 37 sites across the UK.

The size of the new-build industry is trickier to quantify.

Prime Minister Gordon Brown has said at least eight new reactors must be built over the next couple of decades

Soon after the first of the new reactors becomes operational, in 2017 at the earliest, the new-build industry will begin to add to the size of the clean-up industry.

However, since the UK will most likely adopt a single reactor system for all its new nuclear power plants, there will only be one type of waste stream.

That will help curb reprocessing costs when compared with the cost of dealing with waste from a string of different reactors - as has been the case hitherto in the UK.

Complex situation

Given their extensive experience at home, EDF and Areva, both controlled by the French government, may well be well placed to take lead roles as the UK sets out to revive its nuclear industry.

After all, some 80% of France's electricity is generated by its 59 nuclear power generators, compared with less than 20% in the UK, so the two companies' proven ability as technical and commercial operators is not being questioned.

Yet a complex situation could arise from the way the nuclear industry is being funded.

When it comes to the building and running of reactors, it is straightforward; put simply, the return on upfront investment will come from the sale of power in the future - though expect government guarantees of demand to be embedded in contracts here.

But the clean-up costs, which are covered by taxes, are supplemented by income from ongoing operations at the plants.

Sellafield
Cleaning up Sellafield is a large and lucrative task

At Sellafield, much of that income was supposed to come from the waste reprocessing plant Thorp's ability to extract reusable uranium from spent fuel rods.

But in April 2005, a pipe burst, causing a leak of 83 cubic metres of contaminated liquids into a concrete cell lined with stainless steel.

Nobody was harmed by the leak, but Thorp faced a lengthy closure that reduced the budget of Sellafield's owner, the Nuclear Decommissioning Authority (NDA).

The NDA was forced to go cap in hand to the UK government and ask for a fresh cash injection.

It is easy to imagine the political storm it would create if a consortium led by France's Areva were to do the same.

Trust and safety

Beyond the concerns about mounting costs lie the thorny issues of safety and trust.

A couple of recent incidents in France have made such concerns pertinent.

In July, 100 workers at EDF's Tricastin power plant in Bollene, southern France, were contaminated as waste particles escaped from a pipe during maintenance work.

Medical checks found the workers were all fine as the contamination was mild, but it nevertheless pointed to a lack of control.

And only a few weeks earlier, an adjacent Areva subsidiary failed to notify the locals until late in the afternoon the day after some 75kg of liquid containing unenriched uranium leaked into the ground water.

The leak was taken seriously. Locals were told to stop drinking tap water; swimming pools were covered up; farmers and gardeners stopped watering their crops.

For the companies in France, the challenge has been to rebuild confidence in the nuclear industry.

In the UK, the incidents have given opponents of the government's power plans ample ammunition as they are trying to shoot down its nuclear ambitions.



Print Sponsor


RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific