RWE, E.ON scrap $24 billion British nuclear plan

Reuters News
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Posted: Mar 29, 2012 6:48 AM
RWE, E.ON scrap $24 billion British nuclear plan

By Karolin Schaps and Tom Käckenhoff

LONDON/FRANKFURT (Reuters) - German utilities E.ON and RWE have pulled out of a 15 billion pound ($23.78 billion) plan to build new nuclear power stations in Britain, throwing into doubt the UK government's push for a new fleet of nuclear plants by 2025.

The companies said Germany's sudden decision to phase out nuclear power, the high running costs of their Horizon joint venture and the long lead times required for nuclear plants led to a decision to sell the joint entity.

"A strategic decision has therefore been made by both RWE and E.ON that they will not develop new nuclear power projects in the UK through the Horizon joint venture," the companies said in a statement, confirming what sources close to the negotiations had earlier told Reuters.

The companies said they would now look for a buyer for Horizon to ensure that work on its Wylfa site on the Isle of Anglesey, including a power grid connection, would be taken over quickly.

RWE said it had invested a relatively modest amount, in the low triple digit millions of euros, in the joint venture project.

Britain's Energy Minister said the UK's nuclear new build program was still attracting considerable interest and that plans to build Britain's next nuclear plant by France's EDF and its junior partner Centrica remained on track.

EDF and Centrica plan to build Britain's first new nuclear plant at Hinkley Point in Somerset, with a final investment decision expected later this year.

RWE shares were down 0.72 percent and E.ON's stocks traded 1.05 percent lower at 1023 GMT on Thursday.

The utilities had planned to build up to 6,000 megawatts of new nuclear plants in Britain by 2025 and had been due shortly to announce a reactor design choice for Wylfa, the first new plant.

Both businesses have seen profit margins shrink since Germany's decision last year to close its oldest nuclear plants.

Executives at both companies had been hinting that investment in new nuclear plants in Britain was becoming less likely.

E.ON board member Klaus-Dieter Maubach implied earlier this month that the utility's commitment to nuclear was fading, telling a conference E.ON's appetite for nuclear power had "become smaller".

RWE's incoming chief executive Peter Terium previously said a 60 euro per megawatt-hour price for electricity, broadly in line with UK levels, would not warrant construction of a nuclear plant.

RWE confirmed it would not pursue nuclear new build plans in the UK with any other partners.

Britain's government has proposed to reform the country's electricity market, which will include creating contracts to reward producers of low-carbon electricity, such as nuclear power.

The government plans to lay the reform before Parliament in May, but investors are still waiting for clarity on how the contracts will be set up.

A source familiar with the discussions between the two utilities said Horizon wanted more certainty from the UK government that nuclear investors would see a long-term return on their money.

"It's about timing. The government was not moving fast enough," the source said. ($1 = 0.6309 British pounds)

(Editing by Anthony Barker)