Blackfriar: Nuclear looks only option to keeping the lights burning

Doubts this week emerged over the commitment of two key German utility companies who are due to play a pivotal role in building the UK’s fleet of new nuclear power stations.

With an ageing fleet of first generation nuclear power stations coming to the end of their lives by 2023, the race should be on to build their modern replacements.

But this week a German newspaper reported RWE and E.ON are close to abandoning their plans to build two nuclear power plants in the UK, fuelled in part by Germany’s decision to end its reliance on nuclear power.

The paper quoted a manager familiar with the power firms’ Horizon joint venture as saying they were close to dropping investment plans because it would be too expensive.

RWE and E.ON remained tight-lipped on their plans.

“We are awaiting next steps by the British government. There will be no decisions before that,” said an RWE spokesman.

“There has been no change in plans regarding these projects,” added an E.ON spokesman, also saying no further steps would be taken before the Government sets out regulatory conditions later this year.

The Horizon plan was to build at least six giga watts (GW) of capacity in the UK, at sites in Anglesey and Gloucestershire.

Despite the Fukushima disaster, keeping the lights on and avoiding having to source power from countries such as Russia, makes Britain’s reliance on nuclear power unavoidable. Once the imminent closure of the UK’s creaking coal-fired power stations is factored in too, the argument for new nuclear becomes all the more compelling.

Costs appear to be the major stumbling block. Debt-laden RWE is reportedly also considering selling its Npower supply arm. The Government refuses to pay direct subsidy to support building the 16GW of new nuclear capacity – which is estimated to cost £40bn.

But while costs may be a bitter pill to swallow, it is vital these long-term investments continue at pace. The 16GW of new build will create an estimated 30,000 jobs by 2025, with many of these in Yorkshire’s advanced manufacturing and engineering supply chain.

Companies such as Sheffield Forgemasters, Redhall, Davy Markham and Independent Forgings and Alloys have ambitions to play leading roles in the nuclear new build programme. The soon-to-open £25m Nuclear Advanced Manufacturing Research Centre (NAMRC) between Sheffield and Rotherham shows how pivotal new nuclear will be to the region. Pooling skills from both universities and industry, NAMRC will help UK businesses become suppliers of choice to the global civil nuclear sector.

Industry generally remains upbeat on new nuclear. Peter Birtles, a group director at Sheffield Forgemasters, insisted he would treat very cautiously any reports of a weakening resolve in the UK for its nuclear programme.

Blackfriar hopes that is the case. It is vital that plans for new nuclear power stations in the UK are not derailed and remain on schedule. A hefty slice of Yorkshire’s renaissance in high-tech manufacturing is relying on it, not to mention Britain’s energy security.

n Shares in pet drugs company Animalcare took another tumble last night. The York-based company surprised the market on Tuesday with the news that 2012 sales could be £450,000 less than expected after a Swedish pharmaceutical group said it was closing a production unit.

Animalcare was using Swedish company Recipharm to manufacture its 1ml ampoule version of Buprecare, a morphine based pain relief for dogs.

Following the news, house broker Brewin Dolphin reduced its 2012 sales and profits forecasts. The shares fell 4.3 per cent to 168.5p on Tuesday and tumbled another 3.5 per cent last night to 162.5p.

There is no doubt this is an untimely blow for Animalcare.

The group has held its own and continues to roll out a strong pipeline of new products, despite challenging market conditions. It launched two new products last month, dog and cat sedative and reviver Sedastart and Sedastop and another two products should be launched before the end of 2011.

Animalcare is hoping to appoint an alternative supplier for its 1ml ampoule version of Buprecare as soon as it can. This episode should prove to be a temporary blip in what is otherwise a strong company. It has net cash on the balance sheet following the disposal of the agricultural businesses and a good pipeline of upcoming products.

It also has a strong investment case. The pet care market is an emotive one and people in the UK have proved themselves to be remarkably loyal to pets despite the downturn.

Animalcare should recover from this setback and come out the other side.