RWE npower and E.ON have decided not to develop new nuclear power projects in the UK ‘on strategic grounds.’ The two firms are now looking for a new owner for their Horizon joint venture.
Horizon had planned to build up to 6 GW of new nuclear capacity in the UK by 2025. However, say the two utilities, financial pressures brought by a combination of the global economic crisis and accelerated nuclear phase out in Germany have forced them to re-evaluate their capital investment plans. Both companies have emphasised that the move is based on strategic grounds and that both of Horizon’s current projects (at Oldbury and Wylfa) remain 'excellent development options'.
The move is not entirely unexpected. Both German utilities’ earnings have been hit hard by the reactor closures in their home markets. In March, RWE revealed that the nuclear phase-out had caused 2011 earnings to fall by EUR 1.3 billion ($1.7 billion) while E.ON reported a drop in 2011 earnings of EUR 1.7 billion for its nuclear division.
RWE said that a combination of strategic factors had influenced its decision, including: the long lead times and payback period for nuclear projects, the measures that the company has taken in response to the German phase-out (divestments, a capital increase, efficiency enhancements and cuts to capital expenditure budget), as well as the ‘significant ongoing cost’ of running the Horizon join venture.
E.ON said that its decision had been made ‘following a full review and against the backdrop of the wider E.ON group’s financial constraints.’ The company’s chief executive in the UK, Tony Cocker, said that E.ON would focus its UK investment on projects that would deliver earlier benefits for the company and its customers.
Commenting on the announcement UK energy minister Charles Hendry said:
“EON and RWE’s withdrawal is clearly very disappointing, but the partners have clearly explained that this decision was based on pressures elsewhere in their businesses and not any doubts about the role of nuclear in UK’s energy future.”
“The UK’s new nuclear programme is far more than one consortia and there remains considerable interest. Plans from EDF/Centrica and Nugen are on track and Horizon’s sites offer new players an excellent ready-made opportunity to enter the market.”
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