£15 billion was being set aside by the German utility companies RWE and E.ON to create new nuclear power plants in the UK. However, the companies have recently decided to scrap the plan after they realised that the running costs of the venture would be too expensive.
Furthermore, the German government recently made the decision to start phasing out nuclear power, which has definitely influenced these companies. The decision has meant that it will be more challenging for the UK government to reach its target of having many new nuclear power plants within the next 13 years.
The company has recently issued a joint statement which read, “It is our decision to stop developing plans for new nuclear power plants in the United Kingdom. This joint venture, called Horizon, is no longer a viable option for us.” It was earlier leaked to the press that the companies were considering abandoning the venture, but this is the first announcement from the two companies.
However, some development of the project has already taken place and the companies have said they will be looking for a buyer to take over the project in order to make sure that projects that have already started are not abandoned.
Since the announcement, which was made on Thursday, the shares in the company have dropped by about one percent each. The energy Minister for the UK said that the decision by the companies is very disappointing but the country will be pressing ahead with its plans to develop new nuclear power plants in the near future.
Other energy companies, Centrica and EDF are still involved in plans for the construction of a nuclear power plant in Somerset. A decision has not yet been made as to whether construction will take place, but a decision on the investment is expected to be made later in the year. In order to tackle the carbon problem in the country, the government are incentivising low carbon energy producers, such as nuclear power plants.
The director of energy at the consultancy firm, PricewaterhouseCoopers, Karen Dawson has stated, “The market reform that is taking place in the energy market is absolutely essential. The companies need to have some idea of how much energy reform is going to cost and how the development of reactor technology is going to take place.”
An unnamed source close to the discussions has said that the two utility firms are also pulling out of the deal because they are not sure whether the UK government will be able to guarantee that they receive a long-term return on their investment. The source commented, “For these companies the government was not making decisions on the issue fast enough.”
It is expected that the additional pressure that is going to be placed on the UK government because of this withdrawal, is going to benefit EDF is they are going to have a stronger bargaining position about providing new nuclear power plants to the country. Dawson continued, “The government don’t really have a choice now except to push ahead with the EDF project.”
Both the companies involved with the Horizon Project have seen the profit margins reduced since Germany decided to close some of its older nuclear power plants. There is currently 130 staff involved with the joint project and they’ve been told the two companies are looking for a buyer for the project, but right now it is uncertain whether their jobs are going to remain. Staff have also not been informed as to whether any companies have come forward yet to express an interest in purchasing the project.