UPDATE 3-Hitachi wins bid to build up to 6 UK nuclear plants

Tue Oct 30, 2012 11:59am EDT

Related Topics

* Hitachi to build 4-6 nuclear power plants in UK -DECC

* First power plant to become operational in mid-2020s

* Hitachi offered more money than rival bid-source

By Henning Gloystein and Karolin Schaps

LONDON, Oct 30 (Reuters) - Hitachi on Tuesday won a bid to take over a company building up to six nuclear power plants in Britain, reviving hopes for investment in the UK's ageing energy infrastructure but leaving doubts they will come online in time.

Hitachi said it expected to have the first 1,300 megawatt (MW) nuclear power plant in the UK operational by the mid-2020s.

"This is a decades-long, multi-billion pound vote of confidence in the UK that will contribute vital new infrastructure to power our economy," British Prime Minister David Cameron said in a statement.

The British government said that Horizon would eventually include up to six nuclear power plants, which would be able to provide 14 million homes with electricity for 60 years.

Hitachi is taking over the project from German utilities E.ON and RWE for 696 million pounds ($1.1 billion) and said it was already in discussions to find another company to operate the plants after they are built.

Analysts said the Japanese company could struggle to build the facilities in time to fill a looming power supply gap in Britain.

"The deal is certainly a positive development for UK electricity supplies given the concerns in the wake of RWE and E.ON pulling out, (but) if you are looking at a three-to-four year turnaround in the approvals process, that will inevitably fuel concerns over the UK's supply-demand balance in the latter part of this decade," Craig Lowrey, consultant at UX Energy Services, said.

Before construction can start, the Japanese company's Advanced Boiling Water Reactor (ABWR) design will need to be approved by Britain's nuclear regulator, a process that Hitachi said would take three to four years.

Hitachi has a track record of delivering projects on time and on budget, UK Energy and Climate Change Secretary Edward Davey said.

LOOMING SUPPLY GAP

Britain's power generation infrastructure is ageing and in need of modernisation to meet future demand and carbon reduction targets.

"By 2023, Britain will have shut down all but one of its existing nuclear power plants, which means up to 18 percent of current energy supply will disappear," Omar Abbosh of managing consultants Accenture said.

Hitachi said it had signed memorandums of understanding with British companies Babcock International and Rolls-Royce to help deliver the Horizon projects and would create 5,000-6,000 jobs in Britain during construction.

The Japanese company beat a rival bid from Toshiba, which owns U.S.-based nuclear reactor designer Westinghouse. Westinghouse declined to comment on the outcome.

"It was the money in the end. Westinghouse offered about the same, a touch less," said one source close to the negotiations.

The deal is expected to officially close at the end of November.

JAPAN IN, GERMANY OUT

Hitachi has developed a different corporate strategy from that of E.ON and RWE to cope with the nuclear exit policies of their respective governments.

Following the nuclear accident at Japan's Fukushima reactors in the aftermath of a massive earthquake in March 2011, both Japan and Germany announced long-term plans to exit nuclear power generation, leaving companies with a choice of searching for new markets or closing their nuclear businesses.

Germany's E.ON and RWE decided to exit the nuclear sector.

"The sale (of Horizon) is in line with E.ON's revised strategy," E.ON said in a statement. RWE said it now has no further national or international new-build projects under way in the nuclear energy sector.

Hitachi, by contrast, has begun to seek overseas opportunities to sell their nuclear technology to, including Britain, Central Europe and the Middle East.

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