September 28, 2008
Britain’s Family Uraniumis Safe in French Hands
By Margareta Pagano
Vincent de Rivaz, the chief executive of France's EDF Energy, which is now in control of the UK's nuclear energy programme, doesn't laugh when I ask if he has succeeded where Napoleon failed.
"It's not a war," he says, very seriously. "This is an amicable agreement between two companies which will bring good news to everyone involved. Will it bring stability to customers for electricity bills? Yes. Will it bring new jobs? Yes. Will it improve climate change? Yes."
What matters even more, he says, is that EDF's 12.5bn takeover will bring security of energy supplies to the UK and place British Energy at the cutting edge of a revival of the nuclear industry that could bring thousands of new jobs.
But Bonaparte would have been green with envy at the French takeover. EDF, majority-owned by the French government, can already switch off the power to more than five million customers as it provides 7.6 per cent of the UK's energy requirements through its huge gas and electricity distribution network.
Adding British Energy will give the French group control over the UK company's one coal-fired and eight nuclear plants, which generate about 13 per cent of our electricity. It also has plans to build four new reactors, and, once these stations are up and running, EDF could eventually supply more than a third of the UK's total electricity.
There are immediate plans to build two new reactors at Sizewell in Suffolk and two at Hinkley Point in Somerset. These are known as EPRs - evolutionary power reactors - or pressurised water-style reactions like the ones that EDF operates in France. More than 80 per cent of all electricity there comes from the group's 58 reactors, which supply 28 million customers. EDF is also one of the biggest suppliers in Germany and Italy.
British Energy already employs 6,000 people, and under EDF it will need to take on many thousands more to design and build the new stations, which are due to come on stream in 2017. De Rivaz adds that EDF and British Energy are already working with university departments on creating and improving their nuclear physics training - something that has not been done in this country for more than 30 years.
De Rivaz may be enthusiastic about the takeover, but the prospect of the French state-owned EDF owning such a big chunk of Britain's nuclear supplies is alarming to many - not only the consumer watchdogs worried about eroding competition and price hikes, but the anti-nuclear protesters worried about safety and waste.
But de Rivaz claims these issues are close to his heart too.
"People are absolutely right to be worried about safety. I say to people that they are right to attach so much importance to safety. We are equally concerned and will never compromise for two reasons: first, it would be stupid not to have the safest technology possible because of the dangers; second, it would also be uneconomic to do so."
Being transparent and open about EDF is in everyone's best interests, he adds. "I don't believe in a culture of secrecy or of hiding. We put everything on the table because the key element to our industry is trust on safety and on waste." All waste in the new stations, he explains, will be handled according to the strictest government rules.
De Rivaz also believes that nuclear generation will ultimately provide the most stable and competitive prices. "This can only be good news for our customers. Electricity produced by nuclear energy is more stable as it is not so dependent on fossil fuels such as coal, oil and gas whose prices are so much more volatile," he says.
"People will never fall in love with nuclear; it is just a technology after all," he admits. "But it does fix problems." And Britain's problem is that without massive investment in nuclear - or alternative energies - the country will be heading for a "lights out" emergency in 2012 because of insufficient capacity at home, particularly with coal-produced power set to fall as a result of European environmental regulations.
That's why the Government gave the go-ahead for a new nuclear programme earlier this year and why it has now given its backing to EDF, in a deal that will net the state 4bn from the sale of its stake in British Energy.
However, it has taken a long time to get to this stage. Unfortunately, British Energy had neither the funding nor the muscle to build these new stations - they cost about $4bn (3bn) each. Instead, the company solicited takeover bids and talks with rivals such as EDF, RWE, E.ON and Centrica, the parent group of British Gas, took place. Centrica would also have liked to bid but it didn't have the muscle either.
Instead Centrica will take a 25 per cent in the new EDF-British Energy company, giving it the right to a quarter of British Energy's output from its existing generators. This should mean that Centrica will be less vulnerable to volatile wholesale prices for gas and electricity, so holding down utility bills.
But talks over the EDF takeover nearly broke down this summer because of the intervention of Neil Woodford, the influential fund manager at Invesco Perpetual, British Energy's biggest institutional shareholder. Mr Woodford claimed the putative price of 765p a share, valuing the company at 12bn, was too low.
The talks became drawn-out and tortuous, but eventually Invesco was brought on side with the offer of contingent value rights (CVRs) - financial instruments under which investors would receive a payout if British Energy's stations hit certain long-term performance targets. At this stage de Rivaz and British Energy's chairman, Sir Adrian Montague, were able to clinch the deal.
One person who will be keeping a close eye on how events unfold is Peter Luff MP, chairman of the House of Commons Trade and Industry Select Committee, who has warned of a lack of transparency in the UK wholesale electricity markets. Luff has already called for the Competition Commission to scrutinise the EDF-British Energy deal and confirmed that his committee will call in Ofgem, the power industry watchdog, to look at pricing and long-term competition.
But de Rivaz , who is advised by Andrew Brown, the spin-doctor brother of Gordon Brown, does not expect any competition problems and is confident that the deal will bring stability and security to the energy market in the long term.
Tina Cook, an analyst at broker Charles Stanley, predicts the deal will prove a success. "EDF has taken on quite a bit of risk, at a time when there is structural tightness in the energy market," Ms Cook admits, but she adds: "EDF will have very big connections. At a time when there are questions about the abilities of even very large companies to raise finance for new-build nuclear, EDF is the ideal buyer - investors are impressed."
She warns, though, that the consumer cannot expect to see reduced energy prices for some time. "EDF's is a long-term undertaking and there will be no new capacity overnight. New-build power is subject to delay and rising costs, and some reactors are temporarily shut down or out of service."
De Rivaz has become something of an Anglophile since moving here to head EDF's UK business seven years ago, with pictures of the Queen gracing his office walls.
He was born and educated in Grenoble, south east France, before travelling the world as a hydro engineer building dams for EDF, including the Nam Theun hydroelectric project in Laos. He was then brought back to Paris to head an international business, before he made the move to London. He has been busy on the acquisition trail ever since. First on his radar was London Electricity, then SWEB, Eastern Energy and Seeboard. All are now part of EDF Energy.
De Rivaz says he is an environmental as well as a nuclear champion. With three young sons, he explains that he feels responsible for keeping the planet green and claims to have cut electricity consumption by a third and gas by half at his Chelsea home.
At work he is tougher still, ensuring that EDF has the lowest carbon emissions of any energy company, while all his staff are made to watch Al Gore's An Inconvenient Truth. That's serious.
Additional reporting by Jesse Loncraine
(c) 2008 Independent on Sunday, The. Provided by ProQuest LLC. All rights Reserved.