A consortium of infrastructure funds is in advanced talks to buy a stake in the UK’s £6bn ageing fleet of nuclear power stations amid growing concerns about their reliability.
Daily Week News has learnt that Dalmore, Equitix and GLIL Infrastructure are closing in on a deal to buy about 20% of the business, which used to be called British Energy.
Collectively, the power stations generate roughly one-fifth of the UK’s electricity.
A deal could be signed in the next few weeks, although it remains subject to delays because of ongoing problems which have forced a number of the sites to be temporarily shut down by regulators.
If concluded, the transaction would see the consortium, which is being led by Dalmore, paying about £1.2bn for the 20% stake.
It would in effect see a big slug of the UK’s energy generating capacity owned by Korean investors by virtue of their substantial investment in Dalmore-backer funds.
The two selling shareholders are EDF Energy, the French state-owned utility, and Centrica, the owner of British Gas.
Each of the two companies would sell 10% of the EDF Generation business, leaving the French group holding 70% and Centrica owning 10%.
Centrica, which has seen its shares perform miserably in recent years, has signalled that it wants to offload its entire stake as it seeks to get out of the upstream energy sector.
Hunterston B nuclear power station is in North Ayrshire, Scotland
Banking sources said this weekend that JP Morgan had been asked to find investors willing to acquire more of EDF’s shares as well as Centrica’s remaining stake.
EDF, which is heavily involved in the controversial construction of the Hinckley Point C nuclear power station in Somerset, is said by bankers to want to retain a 51% shareholding in the fleet of eight power stations.
The prospective deal with the infrastructure consortium comes at a time when Britain’s energy mix, and its ability to meet growing demand from consumers and businesses, are under unprecedented scrutiny.
The recent outage that left thousands of commuters stranded and hospitals without power triggered an urgent inquiry, with National Grid calling for an overhaul of the UK’s back-up supply systems.
Centrica, which ousted chief executive Iain Conn in July, first signalled that it was open to the sale of its 20% stake in the old British Energy in 2017.
Last year, The Sunday Times reported that China General Nuclear, a state-owned enterprise, was in early-stage talks about buying a large stake in EDF’s UK nuclear power stations.
The estate includes Sizewell B in Suffolk, Torness in East Lothian and Dungeness B in Kent.
In recent months, some of the stations, which are due to be decommissioned over the next decade, have begun to show their age.
The Office for Nuclear Regulation recently gave EDF permission to restart one of the UK’s oldest nuclear reactors at Hunterston B in north Ayrshire, a year after it was shut down to investigate cracks in its graphite core.
The reactor will be allowed to run for four months until its performance is reviewed again.
EDF Energy said the shutdown had cost it £125m in foregone revenues while it investigated the problem.
Centrica, the owner of British Gas, is one of the two selling shareholders
The French utility owns all of the UK’s existing nuclear power stations, and wants to extend the lives of several of them by a number of years.
It is also behind the new Hinkley Point C and Sizewell B sites, which have already proved to be controversial because of their cost and timetables.
EDF paid £12.5bn for British Energy in 2008 – a deal that saw the government pocket £4.5bn from the sale of its minority stake.
Centrica acquired its 20% stake for £2.25bn the following year.
This weekend, an EDF spokesman declined to comment even on whether the company had previously signalled a plan to sell part of its stake in the UK’s nuclear generating capacity.
The potential investment in the existing fleet by infrastructure funds is unsurprising because of their recurring revenue streams – although the stability of that would be jeopardised by any further technical problems at the sites.
Dalmore and Equitix are two of the infrastructure sector’s leading investors, having backed projects such as the Thames Tideway super-sewer and companies including Anglian Water, Cross London Trains and Electricity North West.
An industry source said that Equitix had a history of backing projects through separate vehicles such as its Energy Saving Investments fund, which it runs with the Green Investment Group.
Centrica, Dalmore and Equitix all declined to comment, while GLIL could not be reached on Saturday.