Just when you thought it was safe to invest in Nuclear Waters, along comes the Budget Cuts Shark! This pattern has repeated itself time and again since the completion of the UK’s AGR programme.
Given that the UK Government owns a substantial slice of the equity in at least two UK Banks – and even more if subsidiaries are included – it is a little puzzling to understand why the Treasury seems unwilling or unable to mandate the Banks to provide the necessary funding for all infrastructure projects under a standard mortgage arrangement.
The Energy Minister would be responsible for negotiating the energy tariff agreement, similar to that agreed for Hinkley Point C, and the Banks for providing the funding under a normal commercial arrangement, with repayment over a 50 year term. With the EPR Design already proven, the risk to the Banks would appear to be minimal.
The advantage, of course, to the Treasury is that the Loan would not sit on the UK’s national books as government debt.
Smaller developers working on ‘New’ concepts could still secure ‘seed-corn’ funding to assist them to prove concept, but would then move to a commercial arrangement for deployment.
This model has been successfully used in the US for years.
So, what is the prognosis: The Sizewell C decision will be delayed until 2027/8; SMR’s will be ‘encouraged’, but almost certainly nothing will happen until 2030; Decommissioning will be slowed with funding capped and recruitment stalled; Deep Repository will be postponed until 2060; Fusion will continue to fund ITER, but at the minimal level required to appease other funders; and New Grid Connections won’t happen either – which means old sites will be reused.
The challenge for industry is to address these issues head on – and not with complaints, but by proactively seeking political and financial engagement, thereby removing ‘difficulties from the Ministers Red Box’. With its Energy and Nuclear network of international contacts, Prospect Law can help and support industry endeavours as opportunities are explored.
The personal ramblings and observations of John Ireland, Senior Consultant
About the Author
John Ireland is an internationally experienced energy specialist and senior business executive skilled in the development, negotiation, and management of businesses and technically complex contracts within both the Government and private sectors. John has grown complex businesses in Asia and the Middle East, and assisted international organisations to develop business in and from the UK through joint ventures and partnerships.
