Jun 19, 2006 -- Datamonitor

 

The probable winners of a new nuclear building program will come from a small niche of foreign construction companies, who have considerable expertise and experience in this specialized market. Coupled with this there is also likely to be a clamor from the big UK utilities to operate the new stations or at least purchase the power on long term contracts, provided some guarantees are put in place.

It should be no surprise that that one of the companies possibly in line to benefit is the French construction group Areva. The group, which has built 98 of the world's 443 reactors, agrees with the UK government position that a new generation of nuclear power stations can be launched in the UK without government subsidy, and that they can operate within a competitive energy market.

Bechtel, the US construction and engineering giant, is well placed having previously assisted the UK government with troublesome construction projects such as the Channel Tunnel Rail Link. Having designed or constructed more than half of the nuclear power stations in the US, Bechtel is in a prime position to benefit from any new nuclear build.

A more unlikely option would be Toshiba which, with its newly-acquired Westinghouse arm, has a vast experience in both designing and building civil reactors, albeit mostly in Japan.

More pertinently though, since new nuclear stations are very likely to be built upon existing sites, British Energy will have a role to play in their development, but with its recent financial history it may face some difficulties in raising the necessary finance without any guarantees from the UK government.

On the operational side, the three European utility companies already with a presence in the UK - RWE, E.ON and most significantly EDF - would all be keen to take a role in operating any new nuclear plants. Centrica would certainly be interested in diversifying its generation portfolio to reduce its over-exposure to the volatility of wholesale gas prices and cover its current short position on power.

Clearly there are returns to be made for the companies that do get involved with the development of any new stations, but the first sticking point is in resolving the conundrum outlined by Tony Blair recently: that no incentives are necessary to make the commercial case for new build nuclear. This flies in the face of the sentiment in the marketplace, which is that some concrete guarantees will be required before investment flows into any such program.

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