Just what Britain’s cash-strapped consumers need: an energy security strategy that, even if it got delivered, might cut the gas and ’leccy bills in 2040. Don’t say Boris Johnson can’t do long-term thinking.
Strategy shouldn’t be short-term. But it needs to be the art of the do-able — not a PM coming up with heroic, uncosted promises he won’t be around to carry out. His big idea? Pushing the button on 24 gigawatts of nuclear energy by 2050. Or the equivalent of six more 3,200MW Hinkley Point Cs at £20 billion-plus a pop. Just building one’s caused enough trouble. Hinkley was due to fire up in 2017. Now? Delayed until 2026. As for the build costs, they’re up from £16 billion to £23 billion.
Yes, Putin’s assault on Ukraine has helped to make the case for nuclear in Britain’s energy mix. But the government had to bribe EDF to build Hinkley: a guaranteed £92.50 per megawatt hour for its electricity, index-linked in 2012 prices. True, it doesn’t look such a rip-off lately, with wholesale prices topping £200/MWh. But they won’t always be so high. And missing from the PM’s plans is all the key financing detail. Who, for example, will partner EDF on Sizewell C if China’s CGN gets the heave-ho? Will the taxpayer be funding its one-fifth share?
Dusting off Wylfa on Anglesey is far easier said than done, too. Has the PM forgotten how Japan’s Hitachi spent four years trying to power up that project before jacking it in and writing off £2.1 billion? Business secretary Kwasi Kwarteng reckons Westinghouse might now fancy a go. That’s the company that blew itself up, and most of its former parent Toshiba, with the ballooning costs of two South Carolina projects: up from $9.8 billion to $25 billion.
To boot, the government’s “regulated asset base” financing model for nuclear guarantees bills will go up. It frontloads construction risk on to consumers, leaving them on the hook for cost overruns. South Carolina has ended up paying billions of dollars for an unbuilt nuke. Lib Dem leader Ed Davey reckons the PM’s nuclear plans will “add £96 a year to average bills”. It’ll be lucky if that’s not an undershoot.
Small modular reactors, championed by Rolls-Royce, may prove a better option, but they remain untried. And the rest of the strategy is a mixed bag: the “fifth energy policy announcement in a long line”, as business committee chairman Darren Jones put it, and “yet another missed opportunity to help bill payers”. A deliverable strategy would have ensured quick wins alongside properly costed plans to make Britain more energy-resilient. But instead there are only vague “ambitions”: 50GW of offshore wind by 2030, say. That’s up from 10GW today: a jump that’ll require a vast speed-up in planning. As for onshore wind, which is far quicker to build, the Tories look to be running scared of nimby voters.
The glaring omission, too, was any measures to improve energy efficiency: the quickest way to cut Britain’s energy needs and get consumer bills down. But politics has nixed that, with Rishi Sunak refusing to bring proper incentives to home insulation and heat pumps. Neither was there an attempt at easier stuff: cutting motorway speed limits by 10mph, say, to deliver an instant cut in fuel usage. Or incentivising business to burn less.
Instead, the PM’s produced plans for the big, shiny projects he likes that may never happen. Call it what you like, but it’s not a strategy.
Changing the odds
More proof of why Itai Pazner runs a poker company. The 888 boss has just taken on Caesars Entertainment and won — at least when it comes to negotiating down the price of last September’s £2.2 billion deal to buy William Hill’s non-US wing. The hand Pazner played? Claiming the “world had changed”, not a tactic that typically works when you’ve lost your shirt at Caesars Palace.
Still, he’s got a point. The deal to buy Hill’s UK wing with 1,400 betting shops and online businesses in Italy, Spain and the Nordics was struck in “very different financial markets” — before central banks started hiking rates or Putin’s war on Ukraine. On top, Hill’s has since goofed up. It’s now facing a “licence review” from the UK Gambling Commission after supplying the regulator with inaccurate data for its review of Covid’s impact on gambling behaviour. Hill’s has set aside £15 million for a potential fine.
The upshot? The deal price, including debt, has been cut to no more than £2.05 billion. And 888 now only has to stump up equity of £585 million: a £250 million reduction. Of the new sum, too, £100 million has been deferred to 2024, depending on performance. Better still, it’s left 888 having to pull off an equity-raising of £150 million to fund its buy, rather than the mooted £500 million that had freaked out investors. Indeed, 888 shares had halved since September, putting the deal’s financing in peril, with Pazner admitting shareholders baulked at the “dilution”.
And now? The shares have leapt 17 per cent to 224¼p, with Pazner holding a much nicer hand of cards. True, he may have overpaid in the first place, but that’s a different story.
In the fast lane
Record sales of £668 million, up 312 per cent, with cars sold rising 233 per cent to 49,853. Cazoo looks to be motoring along nicely since its boss Alex Chesterman pulled off his US Spac deal last August, valuing the online car dealer at $7 billion. It was the most valuable ever US listing for a UK company.
Since then? Well, the business hasn’t landed in a ditch — just the market value, with the shares down from a day-one $9.35 to $2.90. Yes, full-year losses of £550 million, after £241 million listing costs, don’t help. But how fast was the market expecting Chesterman to drive to justify the stretch-limo valuation?
alistair.osborne@thetimes.co.uk
