Hitachi buys Horizon of the UK

31 October 2012

Hitachi Limited of Japan has bought the UK’s Horizon Nuclear Power for GBP 696 million ($1.1 billion) from German utility joint-venture partners RWE npower and E.On. The transaction is expected to be completed at the end of November.

ABWR reactor cutaway
ABWR reactor cutaway

The owners of Horizon announced in March 2012 that because of the sudden German U-turn on nuclear power, they would sell the company, which won sites suitable for nuclear power plant construction in Oldbury, Gloucestershire and Anglesey, Wales, in a UK government auction. “It was not an easy decision to take…we needed an earlier benefit from a project,” said Fiona Stark, E. ON UK’s director of corporate affairs, at a 30 October press conference.

The Hitachi Horizon programme involves building two to three ca. 1300 MW ABWR-based nuclear power plants at each site, the first of which would be scheduled to come online in the first half of the 2020s.

But first the ABWR design would have to be approved in the UK nuclear regulator’s pre-construction review, the Generic Design Assessment, which the company estimates would take between two to four years.

To assist with the GDA process, and with other work, Hitachi has signed memoranda of understanding with Rolls-Royce and Babcock International. Rolls-Royce’s MOU also covers design engineering, and development of a new instrumentation and control system, Lawrie Haynes, president, said at the press conference. Kevin Thomas, chief executive, support services, Babcock International Group, said that its role would also include support on modular construction, and support in personnel training.

With the deal, Hitachi’s intention is strategic, to develop a strong competitive base in the UK, which it sees as part of its plans to expand globally in nuclear power, said Tatsuro Ishizuka, vice president and executive officer, and president & CEO of Hitachi’s Power Systems company. However, he said that the company is not interested in actually operating any of the ABWRs built. “Recently the market for nuclear has changed to an investment in generation systems. We [believe] that we have to think about purchase an investment. Over the last few years Hitachi has participated in a petroleum project. We will act as a strategic investor, and share some stake of the NPP,” he said. When asked, “will you operate it?” he replied: “We will discuss with candidate operators; we need some partners as well.”

It is not Hitachi’s first such strategic investment deal; a joint venture between Hitachi and GE-Hitachi Nuclear Energy offered to become a strategic investor with the ABWR in Lithuania’s Visaginas project in July 2011, but the negative results of a referendum connected with October 2012 elections in the country have put those plans in some doubt.

Representatives of RWE npower and E.ON UK at the press conference refused to state how much they had invested in the Horizon joint venture in response to a question. But Volker Beckers, RWE npower group chief executive officer, did say that the Horizon investments consist of two elements: the government auction, in which the company won the Wylfa and Oldbury sites, and the subsequent operations that have been set up with an eye toward enabling operations as a nuclear site licenced company. He also said that the company had developed in-depth understanding of the Wylfa and Oldbury sites through characterisation studies and project management, and had developed supply chain work. The company has headquarters in Gloucester and employs 90 staff.

UK government’s secretary of state for energy and climate change Edward Davey also said that he was pleased that the result of the Horizon purchase ‘reaffirms the competitive tension in UK nuclear’, in which there are three credible utilities and no overreliance on one reactor technology. RWE npower’s Volker Beckers echoed these sentiments when asked for more details about the bidding process. Although he did not disclose the number of bidders, he said that there was lots of interest. “When we had made the announcement [to sell], there was no decision on technology, so any new investor in Horizon could take a fresh view. This was a huge benefit to the process, that it was open to all investor groups.”

The deal comes at an active time for the UK government in nuclear power. It is currently negotiating with EDF on the price of a market mechanism that favours low-carbon energy generation sources, which Davey said would be completed in December. And the government’s proposed electricity market reforms are scheduled to have another reading in Parliament soon.

In a written statement, UK prime minister David Cameron said, “I warmly welcome Hitachi as a major new player in the UK energy sector.”

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