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Chris Huhne’s Green Obsession Threatens Energy Investment

Energy companies have been spooked by the plans of Chris Huhne, the Energy Secretary, to drive through low-carbon reforms in the industry.

Britain’s desire to boost investment and competition in the energy sector will be threatened if German utility group RWE presses ahead with a £5bn sale of npower, MPs have warned.

Goldman Sachs is understood to have been hired by RWE to conduct a strategic review of npower, one of the UK’s “big six” energy firms.

This has been prompted by RWE’s net debts of €27bn (£24bn) and concerns about the Coalition’s energy policy, which threatens to diminish profit margins and require billions of pounds of investment in next-generation power stations.

Tim Yeo, the MP and chairman of the Energy and Climate Change Select Committee, said the potential sale is “worrying”.

“In the work my committee has done this year we have seen a problem in how we will attract the investment needed into this industry,” he stated.

“We will not get it if companies can see better returns elsewhere in countries with more sympathetic regulations and policies.

“People have not accepted that companies may just decide to go to Asia and not invest in Western Europe.”

If the UK fails to attract enough investment then it will be difficult to reduce emissions to committed levels and could even lead to the country struggling to produce enough electricity to meet growing demand, the Conservative MP said.

“We may find we just don’t have enough generator capacity in this country,” he added.

Phillip Lee, another member of the committee, warned a sale could worsen consumer choice of electricity and gas providers. Energy providers are already under pressure following price rises this year.

Npower, which supplies energy to 6.8m homes, was bought by RWE in 2002 for £3.1bn. The company employs 11,000 staff and generates 8pc of the UK’s electricity. Last year it made profits of £245m on revenue of £7bn.

Npower’s rivals, such as Iberdrola, the Spanish owner of Scottish Power, are potential buyers, meaning Britain’s “big six” could become a “big five”.

Mr Lee said: “There is not enough competition now so going from six to five is not the right direction.”

Energy companies have been spooked by the plans of Chris Huhne, the Energy Secretary, to drive through low-carbon reforms in the industry.

Later this month he will publish the final version of the Government’s energy white paper.

The proposals could lead to the biggest industry shake-up in a generation. They aim to deliver up to £200bn of investment into nuclear power stations, wind farms and other forms of low-carbon power generation.

There are also plans for a tax on the emissions of fossil fuel plants, which has already been criticised by npower.

Mr Yeo said there has been a “lack of predictability” in Government policies toward the industry on issues such as low carbon, planning, and the controversial North Sea oil tax in the Budget.

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