Nuclear ban could be sap on Scottish energy

The Sunday Times
January 25, 2009
Significant opportunities in the power sector may be lost because of the government’s current stance

John Penman

Scotland could miss out on significant opportunities in the power sector if the government sticks to its decision not to build nuclear power stations, research suggests.
A study by Price Waterhouse Coopers (PWC) predicts that while deal activity in the power sector will prove more difficult in coming years, the revival of the global nuclear industry offers plenty of opportunities.
Last week Scottish and Southern Energy and Scottish Power owner Iberdrola jointly expressed an interest in participating in the UK government’s commitment to investing in new nuclear power generation. But while the UK government has announced plans to build up to 10 new nuclear power stations by 2020, involving tens of billions of pounds of investment, the Scottish government opposes any new stations.
Jason McBurnie, in corporate finance at Price Waterhouse Coopers Scotland, said Scottish firms could miss out on the nuclear bonanza.
“Nuclear power is undoubtedly a thorny topic. With the richness of nuclear expertise within British Energy and its supplier base, Scotland has much to offer — and to gain from — an expanding nuclear power industry,” he said. “The question for Scotland is whether its government’s policy statement of vetoing new nuclear generation capacity within Scotland will lead to the country missing out on a share of this activity and whether this is a price worth paying for a key Scottish government policy decision?”
McBurnie said the opportunities in the nuclear sector would undoubtedly spread to other businesses.
“The new investment programme could prompt a further round of mergers and acquisitions on a smaller scale, as the search to acquire deep nuclear skills in the consultancy, engineering services and construction sectors intensifies,” he said.
“Indeed, Scottish engineering business Weir Group benefited from this high demand for nuclear expertise when we advised the group last year on the strategic sale of its Strachan & Henshaw division.”
Research by PWC shows that while the number of power deals soared in 2008, the value of deals plummeted as companies faced the new reality of the financial crisis and, in key markets, adopted a “wait and see” approach to big acquisitions.
The latest edition of Power Deals, the annual review by PWC of global power-sector mergers and acquisitions, shows a 24% rise in worldwide power deals for 2008, up to 954 from 768 in 2007, but a 41% plunge in total deal value, down to US$205.6 billion (£151.3 billion) from its record level of US$372.5 billion in 2007.
McBurnie added: “The coming year will be one of obstacles and opportunities in the power sector. The constrained availability of finance will inhibit deal activity and, until that situation is eased, there is unlikely to be a revival in deal values.
“However, with some businesses running short of cash for essential expansion, or facing refinancing challenges, the need for liquidity may force the market, with businesses and assets becoming available for corporates with strong balance sheets and cash flows.”
SWEDEN’S Vattenfall may form a three-way consortium with Spain’s Iberdrola and Scottish and Southern Energy (SSE) to build nuclear reactors in the UK.
Iberdrola, the owner of ScottishPower, and SSE have announced they will unite to bid for new sites. Vattenfall is understood to have held talks with the Scottish groups.
Iberdrola is thought to be open to the idea of Vattenfall taking a share in the stations, which will cost up to £5 billion each.