French to swoop on British nuclear fuel

FRANCE is preparing an audacious multi-billion-pound tilt at Urenco, Britain's statebacked nuclear fuel producer. Areva, the nuclear reactor developer controlled by the French state, hatched the plan after Urenco's biggest investors - two Germany utilities and the British government - put their stakes up for sale.

The move sets the scene for a political showdown over the control of a strategically important industry just days after the dramatic collapse of merger talks between BAE Systems and EADS. The deal fell apart because German, French and British politicians couldn't agree on the ownership of what would have been the world's largest defence group.

The ownership of Urenco is highly sensitive. The company enriches uranium, which is used for nuclear fuel but also in atomic weapons. It was created in 1970 by the German, Dutch and British governments. This month the British government appointed advisers to look at a sale of its one-third stake in the business as part of George Osborne's plans to raise money through privatisations.

After recent sales of the Tote, the bookmaker, and the highspeed rail link between London King's Cross and the Channel tunnel, Urenco is among the largest of the state's remaining assets. Bankers estimate it could bring in more than £3 billion for the Treasury. The company as a whole is thought to be worth up to £10 billion.

The utilities Eon and RWE, which own the German stake, are also keen to sell. But it is thought the Dutch plan to stay in, complicating the privatisation - potential suitors will be unable to buy the whole business.

The sale comes at a critical time. The British government has put nuclear power at the heart of its plans to clean up and rebuild the nation's energy infrastructure. But its scheme to attract foreign developers with huge subsidies has stumbled badly.

Two of the three consortiums formed to build new reactors have disintegrated, put off by soaring costs. One of them, called Horizon, which is controlled by Urenco's selling shareholders, Eon and RWE, has received at least two offers from Chinese and Japanese-led bidding groups. A winner of the auction is expected shortly.

The remaining nuclear development group is comprised of France's EDF Energy and Centrica, owner of British Gas. They are in the final stages of talks with the government over the level of subsidy that they say is necessary for them to build Britain's first new atomic reactor in two decades.

Critically, EDF has chosen Areva's reactor design for the project. If it buys Urenco, that will make Britain still more reliant on France for its energy needs. Areva is already one of the world's largest uranium enrichers. A purchase of Urenco could raise anti-trust concerns, bankers said.

Any deal is expected to take at least six months to complete. Areva declined to comment. Agenda, page 4

From The Sunday Times