By Jennifer Yousfi
And Jason Simpkins
Money Morning Editors
What was once viewed as a slam-dunk deal and partnership between Electricite de France SA (EDF) and British Energy Group PLC has hit a snag, putting at risk the British government's plan to revamp the ailing U.K. nuclear-energy program. But regardless of the deal's outcome, the future of atomic energy remains bright in Europe, and even brighter in the world's emerging markets.
After months of discussion, and with the British government's approval, EDF was set to unveil a $23.5 billion, all-cash offer for British Energy on Aug. 1. But British Energy investors unexpectedly rejected the bid, sending the EDF back to the negotiating table and jeopardizing plans to refurbish the United Kingdom's rapidly deteriorating nuclear-energy program.
The Department of Business and Enterprise had planned to trumpet the deal as a key stage in its plans for a second generation of U.K. nuclear power plants, hoping that EDF would bring an influx of French nuclear technology to the country along with four new nuclear reactors.
"EDF was the Government's 'get out of jail free' card which hasn't materialised – there are tough decisions to be made as the reality is Britain will run short of power," David Hunter, an energy analyst at consultancy McKinnon & Clarke, told The Independent.
British Energy, which is 35%-owned by the British government, supplies roughly 6% of that nation's energy needs. But half of British Energy's 16 nuclear reactors haven't produced energy in the past two weeks and at least four of those shut down since last year due to age-related maintenance problems.
EDF, the world's largest owner of nuclear power stations, seemed like the perfect candidate to help Great Britain achieve its nuclear goals – and to solve an emerging energy crisis. But after months of talks – and even after an increase to EDF's intial bid in May – the deal was rejected, leaving only questions about Britain's nuclear future.
Of course, those questions could be answered sooner than many critics think.
A Change of Plans
EDF has not ruled out making a what would be its third offer for British Energy, saying only that "conditions for a major development in Great Britain are not met to date."
", and EDF may have regrets about the deal not happening… this doesn't at all slam the British nuclear door in their face," Colette Lewiner, an energy sector expert at French management consultancy Capgemini, told Reuters.
In fact, EDF is so determined to carve out a niche for itself, despite opposition, the company has already purchased land next to two nuclear plants in Britain. EDF owns land in Hinkley Point in southwest England, as well as a plot of land adjacent to the Wylfa nuclear power station, currently owned by the Nuclear Decommissioning Authority (NDA). If it could persuade the NDA to sell it further land, this could be the site of its first plant.
As for Britain, the government is disappointed, but will move on without EDF if necessary.
"We thought it was a good deal and we were ready to accept. It would have been a sensible way to take forward new nuclear plans in the U.K.," Business Secretary John Hutton said. But he also added that "nuclear new build does not depend on one single deal. The level of interest in nuclear new build in the U.K. from EDF and from other operators remains high."
EDF's rivals, including RWE AG (OTC ADR: Iberdrola SA of Spain, could offer some competition. Both companies decided against a bid for British Energy earlier this year, but they still have plans to operate their own nuclear power plants in the region.) of Germany and
Also, Centrica PLC (OTC ADR: CPYYY), the owner of British Gas, recently expressed its desire to move into the nuclear sector. The company was ready to take a 25% stake in British Energy once EDF completed its takeover, but has now been forced to review its options.
A resurrection of the deal would be welcomed; Centrica executives have been holding separate conversations with British Energy and they will no doubt explore joint venture opportunities of their own.
Nuclear Energy Powers the Planet
Uranium-fueled nuclear energy is rapidly re-gaining global acceptance as a clean, reliable alternative to such dirty-burning fossil fuels as coal and oil. In a twin bid to combat global climate change and to keep up with soaring demand for electricity, countries are rushing to build nuclear power plants.
There are currently 440 nuclear reactors in operation that combined generate about 16% of the world's electricity. Another 25 are under construction, 38 are on order and 115 are proposed.
France meets almost 80% of its energy needs with a fleet of 58 nuclear reactors and more planned.. It hopes to have 11 more plants operational or under construction by 2010.
More than 40 developing countries have recently approached United Nations officials to express interest in starting nuclear power programs, and China alone is planning to build 30 new plants in the next 15 years – a venture that will consume an estimated $50 billion in capital. In total, the country may require as many as 200 plants by 2050.
(Executive Editor William Patalon III contributed to this report.)
News and Related Story Links:
- Money Morning:
Cashing in on Commodities: The Short- and Long-Term Solutions to the Growing Global Energy Crisis
- Bloomberg News:
British Energy Shareholders May Have Rejected EDF Bid
- The Independent:
UK nuclear plans left in tatters after collapse of EDF deal