Britain faces a power shortfall that could affect five million homes after German energy giants E.ON and RWE Npower pulled the plug on their joint nuclear venture.
The pair teamed up in 2009 with plans to build two nuclear power stations, which together would have produced as much as 6,000 megawatts of clean energy when they opened in the 2020s.
Now they will try to sell the project – hoping the glowing torch will fall into the hands of someone with deeper pockets.
The £10bn scheme, dubbed Horizon, looked in jeopardy last October when the Daily Mail reported that both parties were considering bailing out.
Faced with spiralling costs in the UK and trouble at home following the German government’s U-turn on nuclear energy, the financing of the project came under increasing pressure.
First one, then both parties considered dumping the venture – which both vehemently denied at the time.
But yesterday morning they issued a joint statement confirming that they would pull out and look for a buyer.
‘You have to recognise that the financial firepower we have is less than it used to be,’ said Volker Beckers, chief executive of RWE Npower, the British arm of the energy giant.
And Dr Tony Cocker, E.ON’s UK head, added the situation facing both companies had changed significantly since they embarked on the ambitious plans in 2009.
But the heart of the problem lies not in the UK, but 700 miles to the east.
E.ON and Npower’s German parent RWE jointly run three of Germany’s 17 nuclear reactors, and hold stakes in 23 others across Germany and Sweden.
However following the Fukushima disaster in Japan last March, the political tide swiftly turned against nuclear power.
Following a government knee-jerk, half of Germany’s 17 plants were immediately and permanently shut down.
The result was that cash from the switched-off plants cannot be reinvested elsewhere – costing the companies billions of euros.
On top of that, the cost of decommissioning the plants is unknown – but will be huge.
At the same time, both were facing bills of about £1m a week for the Horizon project, putting additional pressure on their already hard-pressed coffers.
Energy minister Charles Hendry yesterday said: ‘E.ON and RWE’s withdrawal is clearly very disappointing, but the partners have explained that this decision was based on pressures elsewhere in their businesses.’
Horizon’s board was made up of staff from both companies, and was led by chief operating officer Alan Raymant, the former head of E.ON’s British renewables arm.
Its reactors would have been at Wylfa on Anglesey and Oldbury in Gloucestershire, and would have created 800 jobs.
And construction of the plants would have created thousands more, as well as further employment in the surrounding areas.
Currently the UK has 15 nuclear reactors working across eight sites, but many will be forced to shut as their operating life comes to an end.
Two groups are now vying to build a new fleet of nuclear reactors in the UK.
The first is EDF Energy’s venture, of which British Gas-owner Centrica has a 20 per cent stake.
EDF runs the existing fleet of nuclear power stations, and is furthest ahead in the race to open a new reactor.
Its plans will see a new plant opened at Hinkley Point in Somerset – where it already has two other reactors.
The project financing will be unveiled by the end of 2012, and is likely to involve input from foreign sovereign wealth funds.
The other consortium is NuGeneration, a combination of French-owned giant GDF Suez and Scottish Power’s owner Iberdrola, which is based in Spain.
But NuGen – as it is called – has not been without its own setbacks. It was set up as a three-way venture, with Scottish and Southern Energy the final participant. But SSE pulled out last September for cost reasons.
Following yesterday’s developments, two questions remain.
The first is: who will buy Horizon? All of the world’s major nuclear players are already taken up with their own new generation projects, although EDF’s UK boss Vincent de Rivaz hinted that he could take it on.
Another option would be wealthy Asian businessmen or sovereign wealth funds. But while their finances are vast, concerns would arise that they lack the nuclear knowledge that would come with an existing reactor-running party.
The second question is: what will plug the energy gap left by yesterday’s decision?
Britain is already facing the sizeable challenge of making up its energy shortfall – so the loss of five million homes’ worth of power is the last thing the country needed at this time.