Eon-UK chief executive Tony Cocker told a committee of MPs today that Moody’s suggestion that a new nuclear project would affect their rating “was not part of our decision making”, but RWE Npower chief executive Volker Beckers admitted “we are worried about downgrading,” saying that his company had been downgraded last year and that made capital more expensive.
Setting out the fundamental reasons why the two companies had given up on the new-build, both blamed their companies’ new lack of “financial firepower”. Both companies had debts and capital markets were tighter than when the project started in 2009. Both were making less margin on their gas-fired plant – Beckers said current spreads were “£1 now, but we need at least £8 for commercial viability”. In addition both had been hit by the German decision to tax and close down nuclear stations in that country. Cocker said the decision had been taken in March because the Horizon consortium had reached a point where it had to choose to a purchase decision with one of two reactor vendors.
Beckers and Cocker denied that the Electricity Market Reform now under way was a factor in their decision, saying that it would be a framework that stood comparison with others in Europe. Cocker said the problem was the long construction times for nuclear that meant it would be ten years before the project began generating power – and cash. “The issue is longevity of return. Are there investors that have greater patience than us? We believe there are,” he said.
Giving evidence to the Select Committee energy minister Charles Hendry insisted that nuclear power prices would be negotiated with at least two parties – EDF and NuGen, the Iberdrola and GDF Suez consortium planning a project in Cumbria. He said a buyer for the Horizon consortium would be added to that – and could move faster than Horizon had planned – so there could be three companies offering new nuclear.