I see from what I understand is a very reliable source in the Times today that EDF will be ‘asking’ for a Strike Price of £165 in order to build their behind schedule and over-original budget 4 nuclear reactors in the UK. Eagle-eyed readers will have noted that I predicted (with a lot of help from Prof. Steve Thomas of Greenwich University and Peter Atherton of Citi group) that the Strike Price would be £166 (here). I thought when I put pen to cyber paper at that time that this would be a top-end estimate, and top-end it has turned out to be. It is of course an ‘asking’ price, and in any normal negotiation the Government would be quite bonkers to go for anything like such a level; but we live in strange times. Certainly, an estimated £2.8 billion subsidy (sorry, I mean ‘underwriting-along-with-other-forms-of-low-carbon-energy’) per annum doesn’t sound like a cheap deal affordable to customers.
I was out by £1, of course. That could be because some negotiation has already taken place. Here’s what a mole has revealed to me about this.
Two DECC officials and the Minister are sitting at a table. Enter representatives of EDF.
Mr De Rivas (for it is he): Good morning minister. Thanks for agreeing to negotiate with us on the strike price for new nuclear. I can report to you that all is well. The plants will only cost about £7 billion each now and will be on-stream by – well at a push – 2021.
(EDF official coughs loudly).
De Rivas: Oh all right, 2022. How does that suit you?
Minister: (smiles wanly) Well… you did say £5 billion and 2018…
De Rivas: Good, good. Well that’s sorted out then. We’ve had to do some sums, of course… trading conditions, that sort of thing. And we’ve really pared this to the bone. We think £166 as the strike price would be very fair and reasonable under the circumstances.
Minister: (taken aback) No no, we can’t accommodate that. That would mean that we were tipping billions of pounds your way forever.
Mr De Rivas: Well I was afraid you might say that. After all we’ve done. Ah well. Zut alors! It’s just not to be, then. Come on guys, we’ve got a taxi to catch.
Minister: (looking anguished) No, no come back! Look , we’ve got to negotiate this. There are others you know.
EDF officals and Mr De Rivas collapse laughing.
Mr De Rivas: (wiping his eyes) I think the vernacular expression on the street is ‘yeah, right.’
Minister: Look, how does £165 sound? We’ve got to look after the public interest, after all. It would help us greatly if…
Mr De Rivas: Done! Thanks guys. Now, that taxi.
(Exit EDF team)
Minister: (to officials) I think we have been…