Greencoat Capital is considering creating a nuclear investment fund to take a stake in EDF’s proposed Sizewell C plant in Suffolk.
The renewables investment manager is eyeing a move into nuclear that could lead to the fund investing in Hinkley Point C, under construction in Somerset, and the existing Sizewell B plant.
Bankers working for EDF and the UK government are seeking investors to join them in funding the construction of Sizewell C, which could power 6 million homes and is expected to cost at least £20 billion.
Richard Nourse, Greencoat Capital’s founder, said: “My feeling is that there’s a huge amount of money required. When you need a huge amount of money, you normally have to price it to go, and therefore it will be potentially an interesting investment. Given nuclear will be a fearsomely complex and technically demanding area for UK pension funds to evaluate risk, we see an opportunity for Greencoat to be a trusted adviser and manager of funds.”
Greencoat has £8 billion under management through listed and private funds. Schroders acquired a 75 per cent stake in the company earlier this year.
Bankers are understood also to be courting interest in Sizewell C from potential investors including Brookfield Asset Management, the Canadian infrastructure investment group. Centrica, which owns British Gas, is said to be interested. Brookfield and Centrica declined to comment.
Greencoat’s declaration of interest, made at the Aurora Spring Forum conference, comes as EDF, of France, awaits a delayed planning decision now due next week and pushes for an investment decision from the government.
EDF is expected to retain a 20 per cent stake in Sizewell C, with the taxpayer taking a similar percentage, in a deal that would push out CGN, the Chinese state-backed group. Barclays is working for the government and Rothschild for EDF on finding investors for the other 60 per cent equity. It is thought that Sizewell could have a potential total equity requirement of £8 billion.
EDF has not disclosed an updated cost estimate for Sizewell, which it put at £20 billion two years ago; its sister station at Hinkley Point C is now expected to cost up to £26 billion.
The government has sought to make Sizewell C attractive to investors through a “regulated asset base” (RAB) funding model, under which electricity billpayers pay for the plant while it is still under construction and share in the risk of cost overruns.
Investor exposure to cost overruns would be capped with the taxpayer stepping in thereafter.
Luba Kotzeva, managing director for European energy and renewables at Lazard, who previously advised on nuclear at Rothschild, said: “There’s already quite a lot of infrastructure funds, transition funds, looking now at the Sizewell proposition, which wasn’t happening before.”But, she added
that investors still needed clarity over “the actual total envisaged cost”, the debt-equity split and more details of the RAB terms.
Nourse said: “Today we invest client money into renewables, which are expected to deliver long-term, predictable, low-risk, ‘secure income’ returns to investors, much of which are inflation-linked. RAB-based nuclear has the opportunity to deliver similar return characteristics for investors.”
Paul Spence, director of strategy for EDF in the UK, said he hoped that a government investment decision would “still be possible in the near term” despite the political turmoil in the UK, adding it was spending “a lot of money every day, every week” and could not “carry on doing that if it’s not going to go ahead”. A Whitehall source said ministers were still aiming for a decision this summer.