The future of Moorside, the proposed nuclear power station in West Cumbria, hangs in the balance.
Developer NuGen announced this week that it is shedding more than 60 of its 100-strong workforce.
The move comes after plans for the Korea Electric Power Corporation (Kepco) to acquire NuGen ran into difficulties, prompting NuGen’s owner Toshiba to start start looking for other potential buyers.
NuGen said that its remaining staff, including Chief Executive Tom Samson, will be “focused on securing a sale of the NuGen business”.
Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “The announcement of these job losses is no surprise – NuGen had been consulting on redundancies for a month – but it’s still a dark day for Moorside.
“There is a real danger that the expertise assembled by NuGen will be disbanded, making delivery of the project much more difficult.”
The Chamber is repeating its call for the Government to invest in Moorside, taking a stake of 20% or 25% alongside a private developer.
Ministers have agreed in principle to invest as a partner in Hitachi’s Horizon Wylfa Newydd nuclear plant at Anglesey in Wales.
But the Government’s ‘Nuclear Sector Deal’, published in June, ruled out this approach for Moorside and subsequent new-build projects.
Instead, it advocates the ‘regulated asset base’ model.
Rob said: “We believe this is the problem. It doesn’t give potential developers an attractive enough rate of return and appears to have frightened off Kepco.
“We’ve said consistently that the best way to deliver nuclear new build is for the Government to invest as a partner alongside the private sector. That de-risks the project and so reduces the price of the electricity generated.
“It beggars belief that in an advanced economy like the UK, the Government cannot invest in its own nuclear infrastructure.”
Regulated asset base guarantees that the developer’s investment will be recovered over time from consumers albeit under the constraint of a price cap.
This guarantee makes investments relatively low risk and so brings the cost of raising finance close to that for financing government borrowing, even though the borrower is a private developer – not the Government.
But the developer might have to wait many years to recoup its outlay.
Reports in the Korean media suggest this has deterred Kepco, which had wanted to build two of its APR1400 reactors at Moorside, next to Sellafield.
It is concerned that the rate of return might fall as low as 1% to 2% per annum.
State-owned Kepco is constructing four APR1400s at Barakah in the United Arab Emirates, which will bring it an annual return of between 7% and 8%.
The Financial Times reported this week that discussions are ongoing between Kepco, Toshiba and the governments of the UK and Korea as to what exactly the regulated asset base model might entail.
The Korean government is insisting that any Kepco investment in Moorside must pass a “national audit test” before it can proceed. At the same time, Toshiba is exploring a sale of NuGen to other potential buyers.
Prior to the Nuclear Sector Deal, ministers had backed the ‘contract for difference’ model to fund nuclear new build. This was used for the Hinkley Point ‘C’ nuclear power station under construction in Somerset.
Under this model, the private sector developer raises capital to build the power station. In return it receives a guaranteed price for the electricity generated – the strike price – which rises annually with inflation.
Because the developer bears the risks of project delays and cost over-runs, which could potentially bankrupt it, the cost of borrowing is relatively high and that makes the electricity generated more expensive.
The Government was criticised for agreeing a strike price of £92.50 per megawatt hour for Hinkley Point, which compares unfavourably with £57.50 per megawatt hour for the latest offshore windfarms.
Rob said: “The Government thought that the regulated asset base model could give the best of both worlds – cheaper electricity than Hinkley Point without having to invest public money.
“But if the developer can’t get a decent return, the model falls down. If it doesn’t work for Kepco, why would it work for anyone else?”
He added: “We know that Moorside is crucial to Cumbria’s prosperity with on-site employment for up to 6,000 people during construction and 1,000 permanent jobs once it is operational.
“Equally it is absolutely vital to the national interest and energy security.
“Moorside would generate around 7% of the UK’s electricity. It’s difficult to see how that demand will be met without nuclear new build.
“The Government expects up to 36m electric vehicles to be on our roads by 2040, which will lead to a huge increase in demand for electricity.
“We’ve seen forecasts from National Grid that predict an increase in generating capacity from 103GW now to at least 189GW by 2050, and perhaps as much as 268GW.
“Renewables can’t meet all of this demand because of the intermittency factor. There were 65 ‘low wind’ days in the year to March when wind turbines produced less than 10% of their capacity for more than half the day.
“Likewise, for 341 days out of 365, UK solar output was below 10% of installed capacity for more than half of the day.
“Cancelling Moorside is not an option. The Government needs to recognise this and move quickly to find a solution.”
NuGen has had a turbulent history since it was established in 2009 by GDF Suez of France, SSE of the UK and Spain’s Iberdrola.
SSE withdrew in 2011, while Iberdrola sold its stake to Toshiba in 2014.
Toshiba was crippled by a financial crisis in 2016 prompting GDF Suez, by then re-named ENGIE, to trigger an exit clause in its contract forcing Toshiba to buy its 40% stake in NuGen for £111m. That made Toshiba the sole shareholder.
Kepco has been involved in talks to buy into NuGen since 2013. It emerged as the front runner after Toshiba’s financial problems forced it to put NuGen up for sale last year.© Cumbria Chamber of Commerce