British Energy decision is pivotal for future of UK nuclear industry

Wednesday, April 30, 2008

The deadline for the next round of bids for British Energy (BE) has been brought forward, as the Government seeks a swift decision on the future of the UK's nuclear industry. Rothschild, BE's financial adviser, has told potential bidders that it would like to see detailed offers by May 9.

Some of Europe's largest energy companies are considering bidding for BE, which has a pivotal role in the Government's plans for a new generation of nuclear power stations.

France's EdF, Germany's RWE and Britain's Centrica, the owner of British Gas, have submitted indicative proposals.

The companies have under two weeks to firm up their offers, including if they intend to bid on their own or form joint ventures.

It was thought the next round of offers would not have to be filed until the end of May at the earliest. But a Whitehall source said yesterday: "We don't want this dragging on".

The Government, advised by UBS, has asked Rothschild to sift through the initial offers with a view to having a sale completed by early summer.

It is believed that Centrica has warned the Government it would resist strongly any attempt to exclude it from BE's sale.

It would struggle to muster the financial firepower to bid for BE on its own and favours teaming up with EdF, which runs France's nuclear industry. EdF has the money and expertise to go it alone.

John Hutton, the Secretary for Business and Enterprise, has said Britain's proposed new nuclear programme would create 100,000 jobs. But Centrica has told him this could only be achieved if there was direct involvement by a UK company, and one with some control over the intellectual property rights to the technology.

The Government, which owns 35pc of BE, has final say over the sale and is said to have become "hugely sensitive" to the potential controversy of a takeover.

"Basically, Number 10 does not want to get mired in another round of bad headlines," said a source.

BE owns eight nuclear reactors in the UK, sites on which some of the proposed new power stations are likely to be built. Last week, EdF was tipped as planning an 880p-a-share bid, valuing BE at £9.1bn. "That's a daft valuation," said an insider yesterday.

Meanwhile, Centrica is in talks with private equity firms, including Riverstone Holdings, about joint funding for a major wind farm off the coast of Lincolnshire.

Centrica warned earlier this year about the rising costs of the project, which may now be more than £500,000. The company is also in talks with Blackstone and Apax.

The construction of more wind farms is central to the Government's ambitious targets to cut greenhouse emissions by producing 33 gigawatts of electricity from offshore wind by 2020. But Centrica and other energy companies say costs are spiralling upwards because of higher raw material prices.

This article was featured on The Telegraph website.

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