A couple weeks ago, the French nuclear utility, EDF, offered to buy British Energy, its UK counterpart, for the equivalent of around $22.8 billion Canadian. More recently, EDF tried to elbow Warren Buffet’s MidAmerican Energy Holdings out of the bid to acquire Constellation Energy, a Baltimore-based electric utility whose generating fleet includes five nuclear reactors.
To get around U.S. regulations prohibiting majority foreign ownership of nuclear assets, EDF has teamed up with a U.S. venture capital firm.
Even if the move were to succeed, it wouldn’t, on its own, make EDF the biggest nuclear utility in North America. At least six other North American firms—Exelon, Entergy, Bruce Power, OPG, Duke Energy—have bigger fleets than Constellation’s five.
But EDF is the world’s biggest nuclear utility, by far. Acquiring an American utility would be a significant beachhead. And it would be significant especially in light of the still-widespread hesitance among U.S. nuclear utilities to embark headlong on new construction projects. While MidAmerican’s bid for Constellation included the latter’s regulatory application for a new reactor at its Calvert Cliffs site (which involves French reactor technology), MidAmerican is not above walking away from nuclear projects it feels are not economical. It did exactly that last January.
EDF, on the other hand, is mainly nuclear. And it is in for the long haul. EDF can count on unambiguous long-term support from its majority shareholder, the government of France. U.S. nuclear utilities don’t have that kind of government backing, even with the federal loan guarantees under the 2005 Energy Policy Act (see article). George Bush has been the most pro-nuclear president in recent times, but his administration will end in less than a hundred days. As of today, it looks like the next administration will be Democratic. There’s no guarantee that the next president will be anywhere as committed to the atom as Bush has been.
It is a bit ironic that the government of France could backstop the initial phase of the nuclear renaissance in the U.S.
It is also interesting that EDF chose as a takeover target a company with significant fossil assets. Could this be a new trend that sees North American generating companies developing portfolios similar to that of Ontario Power Generation (OPG), i.e., based on coal and nuclear? The most recent print edition of The Bulletin of the Atomic Scientists carries a very interesting interview with John Rowe, the CEO of Exelon. Rowe talks about the tension over climate policy between his firm and the big coal-based generators like the Southern Company, Duke Energy, and American Electric Power. He mentions that nuclear’s congressional support tends to come from those who also support coal.
Could there be a bargain here? I recently talked about the misguided premise underpinning the renewable portfolio standards currently in fashion in North America (see article). Shift emphasis in RPSs to system emission intensity, or portfolio emission intensity, and we could see more OPGs.