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UK Nuclear Hopes Dented

French Takeover of British Energy Collapses

The British government pinned their atomic energy hopes on French giant Electricité de France's planned buyout of British Energy. But after negotiations broke down late last night, the UK may have to wait longer for new reactors.

The British government had been hoping for French help. The UK, said British Business Secretary John Hutton back in March, needed a "significant expansion" in nuclear energy. In May, Prime Minister Gordon Brown echoed the sentiment. The French energy giant Electricité de France was supposed to be a major player in that expansion.

But on Thursday night, the deal collapsed with EDF backing out of talks to take over British Energy. Citing soaring fuel prices, British Energy shareholders argued EDF's 765-pence-per-share offer was too low. The EDF chairman announced on Friday that "financial conditions" have not yet been met for the acquisition to take place.

The total value of the EDF offer was reportedly 12 billion pounds (€15.2 billion). The French company, Europe's largest energy provider, would have gained eight nuclear power plants and roughly a fifth of Britain's energy market. Part of the deal was an EDF promise to build more reactors in Britain.

The collapse of negotiations is a blow to the British government, which has committed to shifting Britain toward atomic energy and holds a 35.5 percent share in British Energy. The government sees nuclear power as an effective way to cut greenhouse gas emissions and meet its goal of a 26 to 32 percent emission reduction relative to 1990 by 2020. Whereas Britain currently gets less than 20 percent of its energy requirements from nuclear, the government hopes to up that to 40 percent. At least 20 new reactors would have to be built to meet that goal, many of them serving to replace aging reactors that will soon have to be taken from the grid.

Indeed, the country is one of many around the world flirting with nuclear power as a way to produce much-needed electricity without pumping carbon dioxide into the atmosphere.

But the UK didn't just have CO2 on its mind when it came to the now-iced EDF-British Energy deal. The government stood to gain about 4.6 billion pounds (€5.8 billion) from the deal, a figure officially earmarked to clean up the country's nuclear industry. After news that the deal was a no-go, British Energy's stock prices fell 4.18 percent, EDF's 0.89 percent.

"We are disappointed by the failure to reach an agreement overnight," Business Secretary Hutton told the BBC. "I think it would have been a good fit."

If British Energy cannot resuscitate a deal with EDF, the company may be forced to contract new reactors on a time-consuming case by case basis. EDF has also shown interest in Spanish utility Iberdrola and Belgian gas and power companies Distrigas and SPE -- but failed to close any of these international deals.

EDF has not ruled out future involvement in British atomic energy projects, although they will not pursue a hostile takeover. Subsidiary EDF Energy is already active in Britain, as are other branches in Germany and Italy.

rbn/AFP/AP/Reuters