THE tragi-comedy that masquerades as a British energy policy has given Gordon Brown one more headache he could do without, though the Government is as culpable in the current impasse as any other interested party.
The country's under-served energy supplies have been left brutally exposed by the unexpected collapse of the £12bn deal that would have seen the state-backed utility Electricité de France (EDF) take control of Britain's nuclear stations.
Ministers
opted in January to back the nuclear option after taking too long to decide whether or not Britain should take this route to ease the country's reliance on imports. The Government is now accused of being too hasty by trying to push through a deal to offload its 35% stake in nuclear power company British Energy at a giveaway price.
EDF must have thought it was getting a bargain until on Thursday night two investors – Invesco Perpetual and M&G – pulled the plug. The 765p a share offer was deemed unacceptable and clearly well below the 920p talked about by some analysts, or even 1100p which Goldman Sachs believed attainable.
The Government must now try either to resurrect the deal with EDF, in which case it must hope the French company is willing to meet investors' demands for a higher price, or else the Department for Business and Enterprise will have to seek a new partner. The latter route inevitably builds further delays into the programme.
Much may depend on whether rival companies re-enter the bidding process. RWE of Germany or the Spanish firm Iberdrola, owner of ScottishPower, could provide an alternative option or at least persuade EDF to raise its offer a second time to see off the competition. The Government must hope that it does so since the greater experience it has in building nuclear plants remains a compelling argument for the deal to succeed. It is also known that EDF is keen to build at least four nuclear stations in Britain and has even ordered some of the components.
The failure of the talks last week was also a blow to Centrica, owner of Scottish Gas, which needs to source new supplies of its own and was expected to take a 25% stake in British Energy as part of the deal. The involvement of a British company in Britain's nuclear future was supported by those in Westminster sensitive to the prospect of handing control of a key industry to an overseas company 85% owned by a foreign government.
It is understood that all those party to the EDF deal are willing to continue talking, even though no negotiations are planned and the Parisians have just begun their long summer holiday. That means any discussions will not resume for several more weeks, creating a vacuum which will be filled by recriminations and much speculation.
While the UK Government has questions to answer, fingers are being pointed at British Energy's brokers – JP Morgan Cazenove and Citigroup – who were tasked with assessing shareholder opinion but appear not to have picked up on the dissatisfaction at either Invesco or M&G. The boards of EDF and British Energy blamed each other for the deal's collapse, the French accusing the British company of messing everyone around and the British saying the French jumped the gun on its plan to announce the deal.
Should EDF and its European counterparts walk away, there is talk of Centrica getting the nod to go it alone with the UK Government. But a British-only solution to a British problem is a long shot. It is hard to see how Centrica could avoid bringing in foreign expertise at some stage to help in the process.
Britain's woeful track record on energy policy is in stark contrast with that of the French, who have a well developed nuclear programme and can now influence what happens in Britain. Key British Energy shareholders may be reluctant to sell cheaply, but without a buyer their shareholdings will fall in value anyway.
Even so, the British Government must ensure that it does not sell the country short and at present it is only the rebel shareholders who are ensuring the taxpayer gets a fair deal.
As noted in this column previously, the silence from the Scottish National Party on this issue has been deafening. While Alex Salmond, the First Minister, was animated in his reactions to ScottishPower's foreign ownership there has been no comment on the transference of British Energy, which is similarly headquartered in Scotland.
Of course, an anti-nuclear policy makes it rather difficult for the Scottish Cabinet to defend this particular Scottish company. But whatever the outcome of Westminster's negotiations on British Energy, the Scottish Government will have to decide how Scotland is to play its part in the new nuclear age.
