Hitachi’s purchase of UK nuclear power station project, Horizon, is starting to look like a deal cast by fate and the industry’s ever changing dynamics as a truly global business sector.
Established nuclear energy business markets, such as Germany and Japan, have had to re-prioritise their strategies in the wake of the 2011 Fukushima nuclear plant tragedy. But Germany and Japan are approaching the global nuclear business opportunity in completely different directions.
What could have initially be seen as a sign of defeat in the case of RWE npower and E.ON UK announcing their wish to pull out of the Horizon Nuclear Power joint venture in March 2012, is now arguably a positive twist of fate for the Japanese nuclear sector, notably for Hitachi.
As many readers will be aware, Horizon, was previously a joint venture established between the two power giants in 2009 that had been working on proposals for new nuclear power stations at Wylfa, on the Isle of Anglesey, North Wales, and Oldbury-on-Severn, Gloucestershire, South West England.
In press notices issued simultaneously by E.ON and RWE, the backers pointed to capital requirements of the new-build programme as a major stumbling block.
“E.ON has decided to focus its investment in the UK on other strategic projects that will allow us to deliver earlier benefit for customers and our company,” said E.ON UK chief executive Dr Tony Cocker, “rather than the very long-term and large investment new nuclear power calls for.”
While both utilities have re-stated their commitment to other UK energy projects, including significant renewable power build-outs, they still see the value in the Horizon project, but because of the German home market’s wish to phase out nuclear this would have had implications on the industry’s ability to create future profits from plant extensions.
“The bottom line was that the decision to start the process 2009 shows we feel UK nuclear has a future and has good sites,” states Daniel Meredith, corporate PR manager for RWE npower.
“It was a good business opportunity and we still believe that. Fundamentally, what changed is that we had invested £4.5bn in projects across Britain, and more elsewhere across Europe as well, and when the recession hit it started to look sensible to slow down the investment,” said Meredith.
Things came to a head, he adds, when Germany announced the closure of its nuclear industry, effectively spelling the end of any life extensions on German reactors and in turn axing future profits for their owners, including RWE and E.ON.
As a consequence, says Meredith: “We have to get rid of several assets, and the nuclear project in the UK was an order of magnitude larger than any other project.”
As if the stars of fate were aligned, Japanese reactor maker Hitachi stepped forward to buy Horizon for £696m in October.
However, the fact that such a long-term investment remains bankable for companies not affected by Germany’s nuclear shutdown is borne out by the fact that French-owned EDF Energy, the only other company pursuing a new-build programme in the UK, is keen to press ahead with plans.
Speaking at an Energy and Climate Change Select Committee hearing in October, EDF Energy chief executive Vincent de Rivaz said: "Our project team now numbers some 800 people.
“We are creating a world-class team, including individuals who have worked successfully on delivering major projects such the London 2012 Olympics. By the end of this year the project will be ready for a final investment decision."
Michael Stuart, media relations manager at EDF Energy, confirms the company’s Hinkley Point and Sizewell new-build projects have “continued momentum” and things have been positive in reference to generic design assessments.
Like RWE and E.ON, Hitachi is also suffering from the loss of its nuclear market at home. But its circumstances are different: it has cash and is keen to enter new markets to keep its nuclear business going.
In these circumstances, the Horizon offer appeared to come as something of a godsend. Hiroaki Nakanishi, representative executive officer and president of Hitachi, said at the time of the Horizon acquisition: "I am extremely pleased that we have been successful in acquiring Horizon Nuclear Power.
“Today starts our 100-year commitment to the UK and its vision to achieve a long-term, secure, low-carbon and affordable energy supply.”
Consequently, observes Hannah Grimsley, public affairs officer at the Nuclear Industry Association, the whole Horizon affair “wasn’t a reflection on the UK market; it was a reflection on the German market.”
Another industry insider points out that the timing could hardly have been better for Japanese and British nuclear interests: “In Japan there’s been a big policy change and Hitachi had to do something. This offered a way into the UK market.”
It is without doubt that new nuclear plants will be built in all parts of the world to secure reliable, cost effective and carbon free energy, but this has so far not enthused the financial markets, so the question is what can the nuclear industry do to become a viable proposition for investment?
As nuclear power plants in Europe approach the end of their designed lifetimes, new ageing-related problems are emerging. But thanks to research efforts by entities such as the JRC and STUK, challenges are being identified and solutions investigated early on.
The UK’s Nuclear Industry Association (NIA) has launched a regeneration campaign, following depressing survey results that found over a third of science, technology, engineering, and maths undergraduates, did not see a career in the nuclear industry.