Centrica's exit isn't as big a deal as you think

Centrica withdrew from new UK nuclear projects.

Yesterday Centrica announced it would not take a 20 per cent share in the new nuclear power plant planned for Hinkley Point in Somerset. It was the minority partner with EDF, and leaves the France-based utility holding the entire (potentially £6 bn) can.

Centrica pulled out because of uncertainty on cost and schedule. No doubt its decision is a blow for the project to build a 1650 MW EPR pressurised water reactor—for which, by the way, EDF has not made a final investment decision. But there still are lots of reasons to hope that the project will still go ahead.

First, the current adverse market conditions favour nationalised utilities (or vendors) like EDF for nuclear new-build; whether it is Russia in India, Turkey, Belarus or China, or South Korea in the UAE, state-owned developers have the deepest pockets. They need them: unlike gas or coal, nuclear power plants demand most of their costs up front.

And those vendors that are not state-owned but wish to pursue nuclear new-build have had to act like it. In 2011, GE Hitachi proposed being a major investor in a new reactor for Lithuania (although those plans have probably been shot down by a referendum). Its corporate cousin Hitachi has recently come to the UK and is underwriting its pre-construction safety assessment (for now) as the new owner of nuclear new-build venture Horizon, after Germany-based utilities e.on and RWE sold out. They were beset by problems at home: after Fukushima, the German government quickly arranged a phase-out of all nuclear power plants. Over the next decade, their once-profitable assets will have to be written off.

One nuclear new-build vendor who has so far not pledged to take a share of a new-build project is France’s AREVA (79 per cent owned by the French state). However, its role as the principal contractor (with Siemens) for Finland’s Olkiluoto 3 has become tantamount to the same thing. To land the contract for the first non-France EPR, AREVA agreed with client TVO on a fixed-price contract. Subsequent delays and cost overruns have led to litigation with billions at stake.

Second, EDF’s purchase of British Energy in 2008 really only makes sense in the context of the opportunity for new-build. Seven of the eight nuclear power plants it bought at the time were based on obsolete technology whose potential for long-term operation was iffy (although their lifetimes will be extended by seven years in general). Those assets were not worth the £12.5 bn purchase cost. What was worth paying for, according to this idea, was lots of potential for new-build sites. Backing out now would harm the company’s future prospects.

Third, the UK branch of EDF, EDF Energy, has had a good 12 months. Its performance in 2012 was the best for seven years, which means not only cash in the bank but also a hopeful step away from technical faults that have hurt recent performance. Commercial production of the first units of its new 1300 natural gas plant in West Burton, Nottinghamshire started in 2012 and the rest are due to come online later this year. When Centrica joined EDF in new-build, it also put in a 20 per cent stake in EDF Energy’s operating nuclear power fleet. It has not announced plans to pull out of that investment.

The most important development for EDF’s new nuclear ambitions was that its nuclear reactor design was finally approved by the regulator at the end of 2012. Although it will still have to apply for a nuclear construction permit, obtaining design approval has broken the back of one of the biggest sources of nuclear new-build investment risk: the uncertainty caused by regulatory scrutiny. As of right now, the EPR reactor is the only modern nuclear power plant design that can be built in the UK. The Westinghouse AP1000 reactor is next in line; it is waiting for a customer to  finish the review process.

Will Dalrymple is editor of Nuclear Engineering International

Photograph: Getty Images
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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland