Following separate strategic reviews, German utilities RWE and EOn have decided not to continue with the development of new nuclear power plants in the UK through their Horizon Nuclear Power joint venture. The partners, citing the cost of Germany’s nuclear phase-out as one of the reasons for their decision, said they will seek new owners for Horizon.
RWE and EOn formed the Horizon joint venture in 2009 and subsequently announced plans for two new nuclear power plants at the existing Wylfa and Oldbury sites. A planning application at Wylfa was scheduled for 2012, and was to be followed by an application for Oldbury once construction at Wylfa had started. Horizon had already completed the purchase of land at both sites and secured a grid connection for the new Wylfa plant. The first reactor at Wylfa was to be commissioned as early as 2020. Ultimately Horizon wanted up to 6600 MWe in nuclear generation capacity across both sites. A decision on which of the two available reactor designs – Areva’s EPR or Westinghouse’s AP1000 – Horizon would build had been expected earlier this year.
However, RWE and EOn have now announced that they had each conducted a strategic review of their involvement in the Horizon joint venture and had decided not to proceed with developing new nuclear power plants at either site.
RWE’s UK subsidiary RWE npower said that “a number of factors had changed” since the two companies set up the joint venture. It noted, “The global economic crisis has meant that capital for major projects is at a premium and nuclear power projects are particularly large scale, with very long lead times and payback periods.” RWE said, “A combination of these strategic factors, together with the significant ongoing costs of running the Horizon joint venture, has led to a situation where capital investment plans have been reviewed.” EOn said that its decision has been made “against a backdrop of the wider EOn group’s financial constraints.”
Both RWE and EOn announced financial results earlier this month for 2011, saying that they had been impacted by Germany’s abrupt change in nuclear policy following the Fukushima accident. The policy change saw the shutdown, almost overnight, of eight of the country’s nuclear power reactors, including RWE’s Biblis A and B and EOn’s Unterweser, Isar 1, Krummel and Brunsbuttel units. The operating lives of Germany’s remaining nine reactors were also reduced from the terms of a 2010 agreement to ‘extend’ the lives of German reactors, costing some as many as 14 years. In addition, a tax on nuclear fuel came as part of the 2010 deal, but was kept by the the government even after it decided to scrap the extension.
RWE said that this change of policy impacted its 2001 results by some €1.3 billion ($1.7 billion), while EOn recorded a €1.5 billion ($1.9 billion) one-off cost for the shutdown of its reactors. RWE said that the accelerated nuclear phase-out in Germany had led the company to “adopt a number of measures, including divestments, a capital increase, efficiency enhancements and a leaner capital expenditure budget.”
Tony Cocker, CEO of EOn UK, said: “EOn has decided to focus its investment in the UK on other strategic projects that will allow us to deliver earlier benefit for customers and our company, rather than the very long term and large investment new nuclear power calls for.” EOn said that it “continues to invest in projects across the UK and the company’s wider UK plans will be unaffected by the decision not to advance Horizon Nuclear Power.”
RWE and EOn will now focus on finding a new owner for Horizon. RWE said, “Both parties will endeavour to ensure that Horizon’s assets and work on development can be taken up quickly by other potential investors.” Cocker commented, “We believe that for the right company Horizon remains an attractive project – but sadly, at this time, not for us.”
RWE npower CEO Volker Beckers said, “It is because of the strength of support for our development work, particularly on the Island of Anglesey, that we continue to believe that nuclear power has an important role to play in the UK’s future energy mix. We are therefore looking to ensure that work on development, including grid connection, can be taken up quickly by other potential investors.”
UK energy minister Charles Hendry said that EOn and RWE’s decision to withdraw from the Horizon joint venture “is clearly very disappointing, but the partners have clearly explained that this decision was based on pressure elsewhere in their businesses and not on any doubts about the role of nuclear in the UK’s energy future.” He noted that the UK’s new nuclear program is “far more than one consortia” and that Horizon’s sites “offer new players an excellent ready-made opportunity to enter the market.”
The UK’s Nuclear Industry Association (NIA) said, “The nuclear phase-out decision in Germany and other global pressures have had a serious impact on the companies’ ability to proceed with the Wylfa project.” However, it added, “We are confident that other investors will emerge to carry on the Horizon project.”
Also noting RWE and EOn’s decision resulted from Germany’s phase-out policy, Alistair Smith, chairman of the Institution of Mechanical Engineers’ power division, said: “It is a sad indictment of successive governments’ failure to nurture a strong UK power generation industry that today a decision made in Berlin can have such a serious impact on British energy policy.”
Apart from Horizon, RWE is not currently involved in any other nuclear power projects outside of Germany. However, EOn operates, and has a majority stake in, the three Oskarshamn reactors in Sweden and is also a partner, with a 34% stake, in the Fennovoima consortium in Finland, which plans to construct a nuclear power plant in Pyhäjoki on the western coast of the country.