Lord Mandelson ready to go nuclear Government close to signing a £170m agreement

FYI
http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article7034860.ece

From The Sunday Times
February 21, 2010

Lord Mandelson ready to go nuclear
Government close to signing a £170m agreement with


LORD MANDELSON is close to sealing a £170m government-backed deal for a nuclear manufacturing facility just days after Corus mothballed its steel plant on Teesside.

The business secretary has been leading talks between Sheffield Forgemasters, the engineering firm, and Westinghouse, the nuclear reactor maker, for months about arranging a financing package for a 15,000-tonne press that would be used to make pressure vessels and castings for nuclear reactors.

Today these are made by a handful of highly specialised facilities, all located in Japan.

The deal with Sheffield, which gained notoriety in the 1990s when it was embroiled in the “Supergun affair” over arms sales to Iraq, would secure a critical piece of infrastructure for a new generation of nuclear reactors in Britain.

Mandelson is under pressure after the Teesside closure left 1,600 industrial workers jobless. He hopes to make an announcement on the Sheffield deal as soon as this week. This could be delayed as final details were still being worked out this weekend but a broad outline has been agreed.

The government is expected to put up roughly half of the £170m project cost in cheap loans structured to comply with European Union rules on state aid. Westinghouse would contribute £50m, in the form of an upfront payment for reactor components, and the EIB would provide a smaller portion. Final investment would be subject to further due diligence.

The business department declined to comment.

Mandelson’s role in the talks is a reflection of his effort to involve the government more intimately in industrial policy. Nuclear is at the centre of Whitehall’s plans to reshape energy infrastructure and meet climate-change targets. At least six reactors are expected to be built over the next two decades — all by foreign-owned utilities.

The government has encouraged them to invest here but has pushed to keep as much work as possible in Britain. The programme is expected to create thousands of construction jobs. Sheffield Forgemasters’ history dates back to the 18th century. It ran into financial trouble in the early 2000s but has since been turned round by Tony Pedder, its chairman, who took over after a tough time running Corus.

The Sheffield negotations are part of a wider lobbying campaign among companies angling for a share of the nuclear building boom.

EDF, the French state-owned utility that bought British Energy last year, expects to build up to four new reactors. It has teamed up with Centrica, owner of British Gas, to share the cost.

Rivals Eon and RWE have formed a joint venture called Horizon Nuclear Power and intend to build at least two plants.

They will be able to use one of two reactor designs, the AP1000 from Westinghouse, and the EPR from Areva, the French state-owned group, that are being reviewed by the Nuclear Industry Inspectorate, the regulator.

EDF is expected to use Areva’s design. Eon and RWE, however, remain uncommitted and are thought to be under pressure from the government to go with Westinghouse so that the country is not reliant on a single design.

The first new reactor is not expected before 2017 and industry experts say the timeline is already slipping. This is due in part to wrangling between industry and government over subsidies.

Utilities are lobbying for a mechanism that ensures a minimum price for power so they can be sure they will be able to recoup the large upfront building costs. The government has said from the outset that it will not subsidise the industry.