Davey heralds Hitachi deal as ‘vote of confidence’ for UK nuclear

The UK’s Secretary of State for Energy and Climate Change, Ed Davey told a press conference today that Hitachi’s acquisition of the Horizon nuclear power project is a ‘big deal for Hitachi (TYO: 6501), a big deal for the UK economy and a big deal for the UK energy sector.’

He led a panel of industry and government chiefs that fielded questions from the media on the impact of Energy Market Reform, sector skills shortages, the risk associated with a Japanese firm post-Fukushima and the risk to Hitachi of taking on Horizon prior to an agreed strike price for the nuclear sector.

Tatsuro Ishizuka of Hitachi with UK energy secretary Ed Davey
Mr. Davey played down suggestions that Hitachi were taking a risk in investing over à‚£696m ($1,118bn) prior to a strike price being agreed for nuclear energy. He also stated that the government’s Energy Market Reform had not deterred investment in the country’s nuclear sector and said he was heartened at the level of interest that had been shown even at the feasibility stage of the process.

The energy secretary said he believed the UK could now become ‘a springboard for new nuclear developments around the world.

“Hitachi’s announcement is, to use the Prime Minister’s words this morning, a decades-long multi-billion pound vote of confidence on the UK. It’s another sign that the UK economy is getting ahead, attracting credible international players to build the infrastructure we need.”

“New nuclear isn’t just about keeping the lights on and emissions down; it’s an industrial strategy with clear potential winners. We want the UK to be globally recognised as the go-to place for the next generation of nuclear and I’m delighted that Hitachi will play a key role in that.”

With a view to showing where the UK government sees itself in terms of world nuclear clout, the minister used the occasion to announce a new strategic partnership, the Nuclear Industry Council, which it is hoped will enable UK companies to take advantage of massive supply chain opportunities for new nuclear projects domestically and around the world.

Mr Tatsuro Ishizuka, CEO of Power Systems Company of Hitachi said the acquisition was the start of what is likely to be an approximately à‚£20bn investment program in the U.K.’s energy infrastructure.

He said on the question of strike price that he felt the government would offer a fair price in line with the UK’s desire to encourage and sustain nuclear energy. In response to whether the original suppliers would be used by Hitachi, he said potential candidates would be surveyed.

While Ed Davey said he would not be disclosing any commercial negotiations as ‘a blow by blow’ narrative, the process would be made transparent once agreement was made and he hoped to work out an agreement by the end of the year.

Kevin Thomas, chief executive of partner Babcock International (LSE:à‚ BAB) said that Hitachi has a project to put forward and that ‘strike price and supply discussion are premature’.

Mr Thomas also said that his company’s flourishing apprenticeship programme is well placed to bridge the skills shortage that is recognised in the sector. “Many of our existing nuclear personnel are in the autumn of their careers and we must inspire a new generation of individuals to work in the industry.

Mr Davey told the conference that Electricity Market Reform had not curbed interest from investors worldwide in the UK nuclear project. He said that interest was plainly evident by the volume of entrants in the bidding process, even at feasibility stage, before adding, “I wouldn’t be here today if people didn’t like the reforms we were making on policy for nuclear.”

Japan, post Fukushima, has also undertaken a Germany- style withdrawal from nuclear but Mr. Davey was unfazed by questions that this may impact on the long term integrity of Hitachi’s investment, and instead drew attention to the healthy competition that would now benefit the sector.

“This is a 100-year commitment and I don’t think anything can be more convincing than that.”

“Crucially the entrance of Hitachi into the market reaffirms the competitive tension in UK new nuclear. There are three credible ventures under way ” EDF-Centrica, Horizon and Newgen, meaning we have the best chance of progressing new builds at competitive price for consumers and without over-reliance on any one reactor technology.

About 60 per cent of the value of the first plant is expected to be sourced from within the UK, with Rolls Royce (LSE:à‚ RR.) and Babcock International already having signed memorandums of understanding with Hitachi.

Lawrie Haynes, President ” Nuclear, Rolls-Royce was also present at the press conference as was Volker Beckers, Group Chief Executive Officer, RWE npower, Fiona Stark, Director of Corporate Affairs, E.ON and John Hayes, Minister of State for Energy at the Department for Energy and Climate Change.

The reactors proposed for the UK are Hitachi’s Advanced Boiling Water Reactor (AWBR) technology -the only advanced new generation technology available in the world.

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