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UK coaxes investor interest in nuclear power

Scottish Widows said it would consider debt financing as RAB funding model underpins the prospective 3.2GW Sizewell C.

The Sizewell C nuclear reactor proposed for the southeast coast of the UK could attract debt investment from Scottish Widows, assuming the project met the company’s ESG criteria – an early sign private investors are starting to take note of nuclear energy.

The proposed 3.2GW project, which will cost about £20 billion ($26.2 billion; €23.8 billion), is awaiting a final investment decision from the UK government. The BBC reported on 27 March that the government would take a 20 percent stake in the operation, with developer EDF holding 20 percent and private investors taking up 60 percent. The previous week, The Guardian reported that Prime Minister Boris Johnson met at a meeting with executives from EDF, Westinghouse and Rolls-Royce to discuss nuclear development; representatives from Aviva Investors, Legal & General, Rothesay Life, Macquarie and the Canada Pension Plan Investment Board were also said to be present.

Central to the government’s push for private investment at Sizewell C and likely future reactors is the use of the Regulated Asset Base (RAB) financing model, replacing the CfD model used on Hinkley Point C in the UK’s south-west.

All but one of the plants generating the country’s 8.9GW of nuclear capacity are due offline by 2030. Hinkley Point C is the first in the UK to use European Pressurised Reactor technology and Sizewell C executives say it will be a replica of it, suggesting that it will be cheaper.

“In the UK specifically there’s been, in the last three or four years, a lack of mega projects, or mega debt investment opportunities”, Scottish Widows’ Adil Jiwa, director of infrastructure debt, said at the summit.

“Clearly, going forward, that’s likely to change, with Sizewell C coming online,” he added. “From a debt perspective, we certainly are monitoring the situation, and will certainly look at the options. It’s hard to say exactly because there’s limited information available. We would potentially look at it, subject to meeting our criteria and ESG is one of those.”

Stephen Vaughan, vice chair of energy and power at Rothschild, financial adviser to Sizewell C, speaking at the summit, said the total equity “private ask is £3 billion, and debt upwards – and potentially well upwards – of £15bn”.

“To attract a lot of money into a new and traditionally difficult sector, a key part of making that work is to create something with which people are familiar. The RAB model is well established in the UK…it has great similarities with regulation of infrastructure throughout Europe…this creates the ingredients in which to attract capital.”

Sounding cooler on the prospect was Macky Tall, partner and chair of The Carlyle Group’s infrastructure group. In a keynote interview, Tall said: “The future of nuclear power will  be determined by… our political leaders… the nuclear issue is more of a political decision than a private sector one now.”