LONDON (Reuters) - Utility Scottish and Southern Energy said it has pulled out of its UK nuclear new build consortium, raising concerns investors may see the British nuclear industry as unattractive despite government efforts to provide incentives.
The Scotland-based utility, which operates around 2,500 megawatts (MW) of renewable energy assets, said it wanted to focus on green energy and gas-fired power plants — technologies with which it has more experience.
“We have concluded that, for the time being, our resources are better deployed on business activities and technologies where we have the greatest knowledge and experience,” said Alistair Phillips-Davies, SSE generation and supply director.
SSE’s partners in the NuGen consortium, France’s GDF Suez and Spain’s Iberdrola, said in a separate statement they intended to buy SSE’s 25 percent share in the consortium, leaving both companies with an equal share of 50 percent.
The transaction amount has not been settled but the sum will be disclosed later, once the parties have agreed on it, an SSE spokeswoman said.
The announcement deals a blow to the British government which wants to see a series of new nuclear plants in operation by 2025 and tried to reassure investors Britain was a safe market by offering policy changes to reward generators of low-carbon energy.
“It sends a big signal to the government saying: ‘Look you’ve got to give us more security’,” said Karen Dawson, director in the energy sector at consultancy PwC.
SSE’s decision comes just two months after the British government unveiled plans to reform the country’s electricity market, giving nuclear power a place in a low-carbon economy but failing to provide details of how generators will see a return on their investments.
The energy ministry said SSE’s decision was a matter for the consortium and that it was working to remove any unnecessary obstacles to investment in new nuclear.
Analysts believe SSE’s decision was a commercial one and its involvement in the nuclear new build programme had been a way for the renewable-focused utility to gain experience in the sector. It was never a key player.
“They entered to learn more, they know the capital costs are huge. It’s probably just a commercial decision, making a call on where to best place their capital in the near term,” said Omar Abbosh, managing director of the resources group at consultancy Accenture.
“Given what’s happened in Germany and Italy, actually the UK is being viewed quite favorably as a place to invest.”
Britain’s ambitious nuclear investment programme stands in contrast with political changes in direction against nuclear in other European countries following Japan’s Fukushima crisis.
Germany decided to reverse lifetime extensions granted to its oldest nuclear plants and to phase out the technology completely by 2022, while Italy abandoned its nuclear revival plans.
German engineering services firm Siemens said last week it had left the nuclear sector, explaining its home country’s decision against the technology played a role in its decision.
Despite SSE’s withdrawal, the NuGen group plans to continue with its project to build 3.6 gigawatts (GW) of nuclear capacity at a site it has bought at Sellafield in West Cumbria.
Its first new nuclear power plant is expected to start around 2023 and a final investment decision is planned for 2015/16.
“We are ... highly confident about our prospects in respect of our development plans in West Cumbria and there is no reason why this decision by SSE should impact upon our plans or timetable,” Iberdrola and GDF Suez said in a joint statement.
The consortium could invite a new partner into the group, but not necessarily a British one, as both GDF Suez and Iberdrola have intensified their ties to the country with acquisitions of International Power and Scottish Power, respectively, a source close to the consortium said.
SSE said it may get involved again in the project in future as an investor or to buy power from the nuclear plant, but in the meantime renewable energy and gas-fired power plants including carbon capture and storage were its priorities.
France’s EDF is planning to build Britain’s first new-generation nuclear plant and German rivals RWE and E.ON have teamed up to build 6 GW of new nuclear plants at Wylfa on Anglesey and Oldbury near Bristol.
The German consortium, called Horizon, said on Thursday SSE’s decision had nothing to do with them and its project continued as planned.
Additional reporting by Marie Maitre in Paris; Editing by Anthony Barker