What a difference a month can make. Here was I in last month’s issue lamenting how ‘unrosy’ the future now looked for new nuclear-build in the UK following the decision of the Franco-Chinese consortium of Areva and China Guangdong Nuclear Power Corporation not to bid for Horizon Nuclear Power, which had been up for sale since early this year.
The ink was barely dry on the page before Hitachi, one of the two remaining contenders in the bid, confirmed it had acquired the joint venture from RWE and E.ON for around £700 million ($1.1 billion).
So, as soon as the transaction is finalised, which is expected to be at the end of this month, Hitachi is expected to embark on an ambitious programme to build up to six nuclear plants. The Japanese engineering group also confirmed it anticipates having the first 1300 MW nuclear power plant operational by the mid-2020s.
Thus, I stand corrected and the UK once again looks set to lead Europe in developing new nuclear. The deal also offered wider economic benefits, including job creation, to the UK, with two leading British companies – Babcock International and Rolls-Royce – confirming that they will be working with Hitachi on the delivery of the new reactors.
However, there is a rather large ‘elephant in the room’, and to put it simply Hitachi is an OEM and not a power generation company or utility. Thus, the Japanese engineering group now finds itself in a new and arguably uncomfortable position as the owner of a nuclear energy producing venture, with a lot of expectation on its shoulders.
Speaking to the Financial Times, Masaharu Hanyu, who heads up the company’s nuclear division, acknowledged that “We aren’t doing it this way because we like it,” adding, “We want a place to build nuclear reactors”. Last year’s Fukushima nuclear accident and the subsequent cancellation of plans for new reactors in Japan essentially meant a collapse in Hitachi’s domestic market, forcing it to look abroad.
According to Hanyu, although Hitachi is currently taking on all the equity risk, the longer term plan is to reduce its ownership by selling stakes to outside investors.
The question is, whether it can attract such investors, and the answer I suspect will very much hinge on what ‘support’ the UK government’s new Energy Bill gives to mitigate the high CAPEX of new nuclear and thus guaranteeing an acceptable ROI. As PEi was going to press, the UK government was still committed to publishing its Energy Bill in November. I, along with many others in the industry, very much hope that it sticks to that commitment.
I have recently returned from Johannesburg, where the first POWER-GEN Africa event took place. It was refreshing to meet and talk with power professionals, who are looking positively to the future – something that sadly cannot be said for the European power industry. Don’t get me wrong, the electricity sectors in South Africa and other sub-Saharan countries face serious problems – too much red tape, lack of market liberalisation and private money, workforce and skills shortages, reliance on a few high-energy users etc.
However, in South Africa in particular, there appears to be a real sense of optimism. It seems its power sector has reached a tipping point and that in the coming years it will experience an explosion in growth, bringing opportunities for both domestic and foreign players. Speaking with Ed Walsh, executive vice president of Black & Veatch’s global energy business, he believes this transformation – both in terms of generation capacity and T&D infrastructure – will happen “much quicker than many South Africans believe”.
Having been there it is of no surprise that the World Economic Forum now ranks South Africa as the third-highest amongst the BRICS economies. Over the next few years, it will be fascinating to follow how its power sector develops as large-scale projects such as Medupi and Kusile come on line, renewable energy resources are exploited and more and more of its population gains access to electricity.
Power Engineering International
Hitachi now finds itself in an arguably uncomfortable position as the owner of a nuclear energy producing venture, with a lot of expectation on its shoulders
Dr Heather Johnstone, Chief Editor