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The end of nuclear Britain?

Hitherto the future of nuclear in Britain has hinged around whether the French nuclear behemoth, EDF (Electricite de France), can find a partner to help bear the cost of new nuclear plants – currently some £14bn apiece. And, not entirely unrelated, whether EDF can squeeze the British government where it hurts into agreeing a ‘strike price’ at nearly twice the current costs of electricity generation, using the blackmail that if the government does not agree, EDF will walk away and there will be no nuclear generator left willing to step into the breach.

At that point the government’s much vaunted new nuclear build programme collapses like a pack of cards. Indeed the chances of this happening are rising by the day. But now another bombshell has been thrown into the mix (if that is not an unfortunate metaphor). EDF is close to bankrupt.

EDF’s stock value has plunged by up to a staggering 85% since 2007 and its indebtedness has grown rapidly from €29bn in 2011 to €39bn now. To put that into perspective, this very level of debt now amounts to more than half its turnover of €73bn. In addition, France’s nuclear fuel company, Areva, is also in free fall. It made a loss of €2.5bn in 2011, but that has now exploded (again, not quite the word) to €100bn in 2012. It also is stricken with very high debt, amounting to €4bn on a turnover of just over €9bn. It too has suffered a catastrophic fall in its stock value of no less that 88% since 2007.

Now Areva has suffered two further highly damaging blows. It has been down-rated by the ratings agency Standard & Poor’s to BBB – one notch off ‘junk bond’ – and its stand-alone credit profile has been downrated to BB- which is one notch off ‘highly speculative’. As if that does not say it all, it has now just been announced that Areva’s chief finance officer is jumping ship and taking up a post in Canada.

The significance of all this is that these were the two companies lined up by DECC for building the first new nuclear plant at Hickley Point in Somerset. The options available for the government are now beginning to close rapidly. As they will soon discover, if you live by the market (one of Thatcher’s legacies), you also die by the market. There will soon be little alternative but to try to make the Treasury cough up the £35bn necessary from taxpayers and electricity bill payers to subsidise the twin reactors planned. It’s beginning to look longer odds than winning the Grand National.

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