EON, RWE Close Bidding for U.K. Horizon Nuclear Venture

EON AG (EOAN) and RWE AG (RWE), the German utilities dropping out of Britain’s atomic-power program, are due to close the bidding today on their Horizon nuclear venture in the country after rising costs prompted their withdrawal.

A group combining Areva SA (AREVA) and China Guangdong Nuclear Power Group Co., a Hitachi Ltd.-led partnership, and a third comprising Westinghouse Electric Co. and China’s State Nuclear Power Technology Corp. are the likely bidders, Malcolm Grimston, an analyst at Chatham House in London, said by phone.

Britain, seeking to replace aging power stations and cut carbon-dioxide emissions, is one of only three western European countries still pursuing plans for new nuclear plants following last year’s Fukushima disaster. Areva and Toshiba Corp. (6502)’s Westinghouse have already submitted designs to the government for reactors and received preliminary regulatory approval.

“Areva and Westinghouse were the technology suppliers bidding into Horizon in the first place and are already in the Generic Design Assessment process,” Daniel Grosvenor, head of the nuclear team at Deloitte LLP in London, said by phone. “The Hitachi group has some catching up to do.”

Areva said July 7 it would team up with China Guangdong Nuclear and other utilities to bid for Horizon, and remains the only company to have confirmed its intentions. Westinghouse may join State Nuclear Power Technology to buy a stake, the Financial Times reported in July, while Hitachi may also be interested, the FT said.

U.K. Investment

Horizon has government support to site reactors in Wales and western England. Britain says it needs 110 billion pounds ($178 billion) of investment by 2020 to replace atomic plants, upgrade grids and cut emissions. It gets about 22 percent of its electricity from nuclear, a similar proportion to the U.S., and is seeking to spur the development of new reactors through a bill that guarantees power contracts.

That encouragement was insufficient to maintain the commitment of EON and RWE, which backed away from the Horizon project in March, citing the high cost of capital. That left Electricite de France SA, Iberdrola SA (IBE) and GDF Suez (GSZ) SA as the only developers progressing U.K. nuclear plans.

Horizon is likely to attract bids of at least 300 million pounds with a “possibility to get significantly more,” said Tony Roulstone, director of the University of Cambridge’s masters program in nuclear energy.

Officials at EON, RWE and the Horizon venture all declined today to comment on the bidding process.

Reactor Approvals

British regulators on Dec. 14 issued “interim” approvals of Areva’s European Pressurized Reactor design and the AP1000 model from Westinghouse, and asked the companies to resolve a list of technical concerns. The reactor makers incurred regulatory costs of more than 25 million pounds apiece to get to that stage, according to the Office for Nuclear Regulation.

Hitachi’s Advanced Boiling Water Reactor, which it makes with General Electric Co., has been licensed in the U.S., Taiwan and Japan, and is yet to seek U.K. approval. Keisaku Shibatani, a Hitachi spokesman, declined to comment on any bid, citing the “other parties involved.”

While Areva this year continued to resolve questions identified by regulators, Westinghouse paused its work until it has a U.K. customer, Westinghouse U.K. Chief Executive Officer Mike Tynan said yesterday in a phone interview.

‘Basket of Issues’

“There’s a basket of issues but there’s not one in itself that would provide a major roadblock” to eventual approval, Tynan said. He declined to comment on Horizon or confirm whether Westinghouse is bidding with State Nuclear Power Technology. It’s already working with the Chinese utility to build four reactors in Sanmen and Haiyang in China.

Areva’s EPR reactor is being built in Finland, France and China, giving the 1,650-megawatt facility more cost certainty, a company spokeswoman said.

“There’s a whole bunch of people running around telling you that they think they know what it costs to build a nuclear power station, and they don’t,” said Dominic Nash, an analyst in London at Liberum Capital Ltd. “The only people who can really afford that risk are going to be large sovereign wealth funds or nationalized companies, hence EDF and the Chinese consortia.”

To contact the reporters on this story: Sally Bakewell in London at Sbakewell1@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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