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Johnson’s Big Push on U.K. Nuclear Power Leaves Investors Wary

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Private investors are yet to be convinced that the returns from nuclear power are sufficiently attractive to plow billions of pounds into a new fleet of reactors that is being pushed by the U.K. government.

Unclear policy, competition from renewables and concerns about how attractive the financial returns will be all make the investment case for nuclear less compelling, according to people involved in the discussions. That could be a major stumbling block for the government as it seeks to enlist private capital to help fund projects like Electricite de France SA’s Sizewell C plant.

A U.K. energy security strategy that had been due to be unveiled this week now looks likely to slip to next week at the earliest. Prime Minister Boris Johnson told LBC Radio last week that the U.K. needs to “go big” on nuclear power, in order to wean the economy off fossil fuels, including imports from Russia. But the country has struggled to progress new atomic power stations, with financing the 20-billion-pound ($26 billion) projects a huge hurdle.

Ministers want private capital for 60% of the costs of building Sizewell C on the Suffolk coast, with the state and EDF both taking a 20% share, according to a person familiar with the issue. Britain is committed to agreeing a financing deal by 2024 to build one plant — which would be Sizewell C — and that target is likely to be expanded in the new strategy.

But for investors, a lack of expertise investing in nuclear energy and potential conflicts with their existing environmental, social and governance policies are additional concerns, people familiar with the matter said. Renewable technologies like offshore wind — which will be another focus of the new national plan — are competing for investor capital and the case there is much clearer, one of the people said.

Industry Meeting

Johnson held a meeting with the nuclear industry and potential investors last week to discuss how quickly new projects could be built. EDF Energy, Balfour Beatty Plc, Rolls Royce Plc and Aviva Investors were among the companies that attended.

EDF, the main nuclear developer in Britain, is facing financial difficulties at home and the French government is considering nationalizing some of its assets. Without the support of private investors, the Sizewell C project is likely to stall. It wouldn’t be the first time — a project at the Wylfa site in Wales was shelved in 2020 amid a lack of private funding to back up what was the most generous package offered by the government at the time.

The EDF unit building Sizewell C declined to comment.

Nuclear will be a key part of the energy security strategy, alongside renewables, the government said in a statement. The government is committed to scaling up the country’s atomic generation capacity, with Sizewell C an important part of that program.

EDF is already building Hinkley Point C in southwest England and Sizewell C is designed to be a copy to lower construction costs. That said, the cost is still likely to be about 20 billion pounds. The government is trying to figure out what to do about the 20% stake that Chinese firm China General Nuclear Power Corp. has in the development of the project.

The U.K. has been saying for years that it supports nuclear, and the energy security plan is intended to demonstrate the government’s commitment to the industry. But it’s being held up by Chancellor of Exchequer Rishi Sunak, who is reluctant to commit new money to fund the plans, according to two people familiar with the matter, who asked not to be identified because the discussions are private.

A lack of interest from pension funds and other investors would be a huge blow for Johnson and his plan to zero out the U.K.’s emissions by 2050.

Many pension and infrastructure funds now have an environment-social-governance mandate and it’s not clear how the nuclear waste aspect of the technology fits with that. The decision to label nuclear as a sustainable investment in the European Union’s energy plans was controversial. A number of investors and lenders, including the European Investment Bank, said they’ll likely shun the technologies in portfolios.