Nuclear dilemma as British Energy sale fails

THE UK government's aim of turning Britain into the world's "number one location" for new nuclear power stations hit a major stumbling block yesterday as the sale of British Energy collapsed.

The attempted takeover of British Energy, which owns eight nuclear power stations, including Hunterston B and Torness in Scotland, failed at the 11th hour after major shareholders rejected a bid from the French state energy firm EDF.

Critics fear this will leave the government racing against the clock to encourage private firms to build the next generation of power stations. Those in service are due to start being decommissioned from 2014. Nuclear power provides 19 per cent of the UK's electricity supply.

Gordon Brown, the Prime Minister, has given his strong backing to nuclear power as a way of reducing the UK's reliance on gas to fire its power stations. Along with wind power and other renewable technologies, nuclear energy is seen as a way of meeting the target of cutting greenhouse gas emissions by 60 per cent by 2050.

The £12 billion sale of British Energy, based in East Kilbride, is understood to have collapsed after two investors, Invesco and Prudential, thought that EDF's revised offer of 765p a share – up from 700p – was too low at a time of soaring global oil and gas prices.

This price would have raised about £4 billion for the Exchequer as the government owns 35 per cent of British Energy.

EDF, the world's largest nuclear plant operator, yesterday said it was not prepared to make a hostile bid for the company, but that it remained interested in investing in the UK. Pierre Gadonneix, EDF's chairman, said: "I confirm our ambition is to be a major actor in the nuclear renaissance in the UK."

Unions were quick to criticise the government – which has refused to subsidise the building of new power stations – for appearing powerless. Last year, it sold off its majority shareholding in British Energy.

Two months ago John Hutton, the Business Secretary, appealed for energy firms to apply to build new nuclear plants, saying that the government was prepared to do "everything we can" to make them available "as soon as possible".

Sites have yet to be confirmed, but it is expected they will sit alongside the existing power stations as they are decommissioned. However, planning in Scotland is devolved to Holyrood – and the SNP Government has made clear it will not allow new power stations to be built while it remains in power.

Mr Hutton said he was disappointed that the sale had collapsed, and it was for the boards of British Energy and EDF to decide how to proceed. He insisted that interest from investors "remains high".

He said: "Our commitment to nuclear power is clear and nuclear new build does not depend on one single deal. British Energy still has potential sites and sites are available from the Nuclear Decommissioning Authority."

Charles Hendry, Tory shadow energy minister, said the collapse of the deal was "worrying but not critical". He added: "Time is not on our side, as the government has left it very late to give a firm direction for nuclear. We need a clear resolution quickly, as further delays might make it difficult to fill the looming energy gap."

However, Steve Webb, the Liberal Democrat environment spokesman, claimed the government's energy policy was in "total disarray". He said: "New nuclear build is supposed to be a central part of the government's energy strategy, but it seems to be dependent on the decisions of foreign companies over whom it has absolutely no control."