The Nuclear Option

MacMickster

Interesting commentary from Robert Peston about the dispute between the treasury and EDF which is set to scupper the proposed new Hinckley Point nuclear power station.
http://www.bbc.co.uk/news/business-21654697

This would at the very least seriously delay the replacement of power stations in the UK, if not cause terminal damage.

The argument centres around the guaranteed rate of return that EDF want for making the investment. In my opinion, this is exactly the sort of infrastructure project that the government should be investing in directly, rather than relying on investment from the private sector. It is a far better investment for the entire UK economy than high speed rail lines, and would help to secure the national energy supply going forward.

Time for Call Me Dave to step up and provide some decisive leadership for the good of the country.

michaels

Sounds like a high-stakes game of poker, EDF obviously think they hold the best cards, take our deal or the lights go off sort of thing...

vivatifosi

michaels wrote: »

Sounds like a high-stakes game of poker, EDF obviously think they hold the best cards, take our deal or the lights go off sort of thing...

I heard analysis on the radio yesterday saying that EDF know that they are the only one holding cards. There are no other power companies in the game - not sure whether this is down to lack of interest or capabilities - so it's either their way or the highway. Couple that with a government who have a very specific way of wishing to do things (ie must go down the private sector route) and it is very scary indeed.

purch

Not that I am against Hinckley C, but you would be amazed (or maybe not) by the lengths EDF have gone to in order to get the inhabitants of West Somerset, Sedgemoor and Taunton Deane onside in this debate.

New roads, schools, leisure facilities, just about everything you could imagine from those generous people at EDF.

Effectively bribing the people with their own money.

ILW

MacMickster wrote: »

Interesting commentary from Robert Peston about the dispute between the treasury and EDF which is set to scupper the proposed new Hinckley Point nuclear power station.
http://www.bbc.co.uk/news/business-21654697

This would at the very least seriously delay the replacement of power stations in the UK, if not cause terminal damage.

The argument centres around the guaranteed rate of return that EDF want for making the investment. In my opinion, this is exactly the sort of infrastructure project that the government should be investing in directly, rather than relying on investment from the private sector. It is a far better investment for the entire UK economy than high speed rail lines, and would help to secure the national energy supply going forward.

Time for Call Me Dave to step up and provide some decisive leadership for the good of the country.

How could the government take on such a project?

Would you mean just borrow the money and pay EDF to build and run the station?

Wookster

Peston wrote that the government seems to think an IRR of 10% is too high. Does anyone know what returns other energy companies are making globally?

We've had 15 years of inaction. Folks just need to pull their fingers out and get things moving.

Generali

Wookster wrote: »

Peston wrote that the government seems to think an IRR of 10% is too high. Does anyone know what returns other energy companies are making globally?

We've had 15 years of inaction. Folks just need to pull their fingers out and get things moving.

I think that the IRR is a weird calculation. I don't think it equates with return on equity or anything like that.

I'm no accountant but ISTR reading some stuff about this years ago in my hedgie days.

CLAPTON

ILW wrote: »

How could the government take on such a project?

Would you mean just borrow the money and pay EDF to build and run the station?

If the government deems it necessary to have nuclear power then it would indeed be preferably for the government to commission the power station by competitive tender.


The actual running too could be by compettive tender or using home grown talent. We do surprisingly enough have nuclear engineers.

Writing an open cheque for the next 30 years seems just one more disasterous PFI like contract.

MacMickster

ILW wrote: »

How could the government take on such a project?

Would you mean just borrow the money and pay EDF to build and run the station?

No. I don't think that such a project should be beyond the government, and there is certainly nothing wrong with borrowing for the purpose of constructing an income producing asset.

Why do you consider that the private sector should have any involvement in this at all? Surely it is in our national interest to have such vital infrastucture controlled by the UK government rather than some foreign-owned company who could hold us to ransom by switching off our energy supplies.

ILW

MacMickster wrote: »

No. I don't think that such a project should be beyond the government, and there is certainly nothing wrong with borrowing for the purpose of constructing an income producing asset.

Why do you consider that the private sector should have any involvement in this at all? Surely it is in our national interest to have such vital infrastucture controlled by the UK government rather than some foreign-owned company who could hold us to ransom by switching off our energy supplies.

The UK state sector does not have the skills or the manpower to build a nuclear power station. They would have to pay the private sector to do it.

Wookster

Generali wrote: »

I think that the IRR is a weird calculation. I don't think it equates with return on equity or anything like that.

I'm no accountant but ISTR reading some stuff about this years ago in my hedgie days.

IRR would be the net present value of net future cash flows over the investment. I thought it would be a reasonable benchmark, especially for huge infrastructure investments where you (allegedly) have stable and predictable cash flows.