Britain’s electric shock
THE best that can be said about state-controlled Electricite de France (EDF) is at least it is up-front about the soaring cost of Britain’s next generation nuclear reactor at Hinkley Point in Somerset.
It required a review ordered by Boris Johnson to tease out the surging cost of HS2, the high-speed railway between London and Manchester.
Similarly, while everyone is more or less agreed on the need for a third runway at Heathrow, the whopping costs of the scheme have advocates and opponents scratching around for other choices.
As Sir John Armitt, the chairman of the National Infrastructure Commission, pointed out on these pages, managers of UK projects have a terrible habit of thinking it is safe to gold-plate schemes rather than deliver them on time and on budget.
That said, as anyone who watched the terrifying Sky/HBO TV series Chernobyl might testify, cutting corners when it comes to nuclear plants and their safety should never be an option.
It was clear from the start that building Hinkley always was going to be a challenge. EDF has experienced delays on its sister plant at Flamanville in France and a similar reactor in Finland has had difficulties.
The high Hinkley cost of up to £22.5bn will lead to calls for the project to be abandoned and for Britain to invest more in solar and wind power. But to do so would be damaging to Britain’s energy future.
When the wind blows the UK is now capable of producing up to 50pc of its electric needs using renewables. But this is still an unreliable source of supply.
The wind can let us down and, unlike gas, there is no easy means of storage. Moreover, as the UK moves towards electric propulsion for motor cars the demand for electricity will expand exponentially.
In such circumstances the base load – the electricity provided by nuclear generation – will become ever more important if we want to keep the lights on.
Clearly, it is important that the National Audit Office holds EDF’s feet to the fire. The British taxpayer doesn’t want to prop up a limping French generator.
But those who oppose Hinkley need to remember that much of our existing nuclear fleet is elderly and less easy to operate safely. If built, the new plant will provide 7pc of the nation’s need.
And even though the strike price agreed with EDF is high by the time it reaches the consumer it will be a blended tariff including cheaper energy sources.
A weakened Government needs to stick with it. There are tens of thousands of engineering jobs, technology and security of power supplies at stake.
Legacy value
BARRING last-minute slip-ups the man from the Pru will become the man from M&G when the Prudential does the splits and gets its own quote next month.
It has meant a mammoth job for the lawyers and investment bankers and resulted in a 330-page prospectus.
The demerger has come at a cost of more than £1m for each page of a very dense document. Chief executive John Foley has set himself some tough targets for the first three years out on his own, pledging to accumulate £2.2bn in capital.
He intends to do this by building on the M&G brand across Europe and expanding the reach of Pru Fund, an asset manager with a trusted ten-year time frame which offers investors an alternative to low interest returns in cash assets.
Among recent projects, it financed the Dartford Bridge. Foley seems unfazed by Brexit, says M&G has covered regulatory bases with a Luxembourg set-up and is raring to expand.
Early estimates suggest a market value of £5bn to £6.6bn, which puts it in the same bracket as Standard Life Aberdeen and well below Schroders and L&G. That would seem to undervalue a company with assets of £144bn and a healthy annuities franchise.
Golden Eye
SPORTS utility vehicles are all the rage and fancy marques, including Bentley, Porsche and Maserati, are out there already.
It is hard to know what Aston Martin will bring to the party unless Daniel Craig can offer some magic in the next Bond film.
After borrowing £120m at 12pc, chief executive Andy Palmer will need some pizzazz if he is to compete in a crowded space.