The UK Government is hoping utilities will deliver up to ten new build nuclear stations in the UK by 2025, with construction of the first plants starting in 2013. However Stephen Vaughan, head of utilities at Rothschild told delegates that the high cost and risks associated with nuclear new build, combined with scarcity of debt funding, could see far fewer nuclear plants built in the UK than planned.
Speaking at the Nuclear Build: Construction Challenges Conference in London, Vaughan said that the current debt funding crisis, combined with the high risks associated with building new nuclear plants, meant utilities would have to fund their nuclear reactor schemes on balance sheet.
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With each twin reactor costing at least ВЈ8bn, Vaughan said utilities would struggle to fund more than one scheme, even in joint venture with other utilities.
Vaughan estimated that, like oil companies developing oil fields, the utilities would invest no more than 5% of their enterprise value (EV) in a nuclear scheme, requiring a balance sheet of ВЈ160bn. "The EV of potential nuclear sponsors falls short of this," he told delegates.
Vaughan said utilites recognise the cost challenges, pointing to recent joint venture arrangements between RWE and EON; and Iberdrola, GDF Suez and Scottish and Southern Energy but he questioned whether these alliances would be able to deliver more than one scheme at a time. He said: "To get these schemes going will be immensely expensive, particularly with the regulatory risk."
He said managing the risks on such expensive schemes would be crucial and could result in utilities insisting on controlling the projects.
However EDF external affairs director Richard Mayson insisted EDF had the financial strength to deliver its programme of four nuclear twin reactors. Pointing out that EDF had already invested ВЈ12.5bn in buying British Energy he added that EDF "has huge financial strength and is extremely confident and comfortable with its nuclear investment plans in the UK."
David Bonser, European Nuclear Society president also questioned Vaughan's arguement. "Developing an oil field is less predictable in terms of the final outcome, than building a nuclear station. Nuclear has its own risks but these do not compare to an oil field."
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