the times | Friday April 8 2022 V2 37Business
Nuclear option risks
turning into dust
J
ust what Britain’s cash-
strapped consumers need: an
energy security strategy that,
even if it got delivered, might
cut the gas and ’leccy bills in- Don’t say Boris Johnson can’t
do long-term thinking.
Strategy shouldn’t be short-term.
But it needs to be the art of the do-
able — not a PM coming up with
heroic, uncosted promises he won’t
be around to carry out. His big idea?
Pushing the button on 24 gigawatts
of nuclear energy by 2050. Or the
equivalent of six more 3,200MW
Hinkley Point Cs at £20 billion-plus
a pop. Just building one’s caused
enough trouble. Hinkley was due to
fire up in 2017. Now? Delayed until - As for the build costs, they’re
up from £16 billion to £23 billion.
Yes, Putin’s assault on Ukraine has
helped to make the case for nuclear
in Britain’s energy mix. But the
government had to bribe EDF to
build Hinkley: a guaranteed £92.50
per megawatt hour for its electricity,
index-linked in 2012 prices. True, it
doesn’t look such a rip-off lately,
with wholesale prices topping £200/
MWh. But they won’t always be so
high. And missing from the PM’s
plans is all the key financing detail.
Who, for example, will partner EDF
on Sizewell C if China’s CGN gets
the heave-ho? Will the taxpayer be
funding its one-fifth share?
Dusting off Wylfa on Anglesey is
far easier said than done, too. Has
the PM forgotten how Japan’s
Hitachi spent four years trying to
power up that project before jacking
it in and writing off £2.1 billion?
Business secretary Kwasi Kwarteng
reckons Westinghouse might now
fancy a go. That’s the company that
blew itself up, and most of its former
parent Toshiba, with the ballooning
costs of two South Carolina projects:
up from $9.8 billion to $25 billion.
To boot, the government’s
“regulated asset base” financing
model for nuclear guarantees bills
will go up. It frontloads construction
risk on to consumers, leaving them
on the hook for cost overruns. South
Carolina has ended up paying
billions of dollars for an unbuilt
nuke. Lib Dem leader Ed Davey
reckons the PM’s nuclear plans will
“add £96 a year to average bills”. It’ll
be lucky if that’s not an undershoot.
Small modular reactors,
championed by Rolls-Royce, may
prove a better option, but they
remain untried. And the rest of the
strategy is a mixed bag: the “fifth
energy policy announcement in a
long line”, as business committee
chairman Darren Jones put it, and
“yet another missed opportunity to
help billpayers”. A deliverable
strategy would have ensured quick
wins alongside properly costed plans
to make Britain more energy-
resilient. But instead there are only
vague “ambitions” — 50GW of
offshore wind by 2030, say. That’s up
from 10GW today: a jump that’ll
require a vast speed-up in planning.
As for onshore wind, which is far
quicker to build, the Tories look to
be running scared of nimby voters.
The glaring omission, too, was any
measures to improve energy
efficiency: the quickest way to cut
Britain’s energy needs and get
consumer bills down. But politics
has nixed that, with Rishi Sunak
refusing to bring proper incentives
to home insulation and heat pumps.
Neither was there an attempt at
easier stuff: cutting motorway speed
limits by 10mph, say, to deliver an
instant cut in fuel usage. Or
incentivising business to burn less.
Instead, the PM’s produced plans
for the big, shiny projects he likes
that may never happen. Call it what
you like, but it’s not a strategy.Changing the odds
M
ore proof of why Itai Pazner
runs a poker company. The
888 boss has just taken on
Caesars Entertainment and won —
at least when it comes to negotiating
down the price of last September’s
£2.2 billion deal to buy William Hill’s
non-US wing. The hand Pazner
played? Claiming the “world had
changed” — not a tactic that
typically works when you’ve lost
your shirt at Caesars Palace.
Still, he’s got a point. The deal to
buy Hill’s UK wing with 1,400
betting shops and online businesses
in Italy, Spain and the Nordics was
struck in “very different financial
markets”, before central banks
started hiking rates or Putin’s war on
Ukraine. On top, the firm has since
goofed up. It’s now facing a “licence
review” from the UK Gambling
Commission after supplying the
regulator with inaccurate data for its
review of Covid’s impact on
gambling behaviour and has set
aside £15 million for a potential fine.
The upshot? The deal price,
including debt, has been cut to no
more than £2.05 billion. And 888
now only has to stump up equity of
£585 million: a £250 million
reduction. Of the new sum, too,
£100 million has been deferred to
2024, depending on performance.
Better still, it’s left 888 having to pull
off an equity-raising of £150 million
to fund its buy, rather than the
mooted £500 million that had
freaked out investors. Indeed, 888
shares had halved since September,
putting the deal’s financing in peril,
with Pazner admitting shareholders
baulked at the “dilution”.
And now? The shares have leapt
17 per cent to 224¼p, with Pazner
holding a much nicer hand of cards.
True, he may have overpaid in the
first place, but that’s a different story.In the fast lane
R
ecord sales of £668 million, up
312 per cent, with cars sold
rising 233 per cent to 49,853
(report, page 39). Cazoo looks to be
motoring along nicely since its boss
Alex Chesterman pulled off his US
Spac deal last August, valuing the
online car dealer at $7 billion. It was
the most valuable ever US listing for
a UK company.
Since then? Well, the business
hasn’t landed in a ditch — just the
market value, with the shares down
from a day-one $9.35 to $2.90. Yes,
full-year losses of £550 million, after
£241 million listing costs, don’t help.
But how fast was the market
expecting Chesterman to drive to
justify the stretch-limo valuation?[email protected]business commentary Alistair Osborne
Britain and will be available at Coral-
sponsored events throughout the year,
with its next stop at Newcastle race-
course on Good Friday. The footage
was filmed over eleven fences using
cameras mounted on the helmets of
seven jockeys.
Entain said that it was using techno-
logy to revolutionise its interactions
with punters. In addition to the Coral
experiment, it said that it was giving
Bwin customers the chance to play
football on the Uefa Europa league
final pitch and was giving Ladbrokes
football fans the ability to stream music.
The gambling group announced the
virtual reality offerings as it reported a
31 per cent jump in first-quarter net
revenues on the return of its betting
shops. This was offset by an 8 per cent
fall in online net revenues after strong
comparative trading this time last year.
BetMGM, its American joint venture
with MGM Resorts International, went
“from strength to strength”, establish-
ing itself as the market No 2, with a
share of 24 per cent.
Entain shares fell 66½p, or 4.1 per
cent, to £15.55.HP is latest source of interest
for newly acquisitive Buffett
Callum Jones
US Business CorrespondentWarren Buffett’s holding company is
now the largest shareholder in HP after
acquiring an 11.4 per cent stake in the
personal computing and printing
group.
Shares in HP reached record highs
yesterday, rallying by as much as 17 per
cent, after a stock market filing showed
that Berkshire Hathaway had bought
121 million shares. The stake was worth
$4.2 billion as of Wednesday evening.
It is Berkshire’s third significant
transaction since the end of February,
when Buffett, 91, told shareholders in
his annual letter that there was “little
that excites us” on the market.
Last month it bought Alleghany, an
insurance group, for $11.6 billion in
cash, marking Berkshire’s largest acqui-
sition in six years, and disclosed a14.6 per cent stake in Occidental Petro-
leum, the American shale oil producer,
which cost more than $6 billion to
amass.
HP said: “Berkshire Hathaway is one
of the world’s most respected investors
and we welcome them as an investor.”
Buffett has run Berkshire since 1965.
He is known as the Sage of Omaha for
generating market-beating returns for
shareholders. The sprawling Nebraska-
based conglomerate owns businesses
including the Dairy Queen ice cream
parlour chain and BNSF, the rail trans-
port group. It has stakes in companies
including Apple, Coca-Cola and Gen-
eral Motors.
Shares in HP jumped by 14.8 per cent,
or $5.15, to close at $40.06 in New York,
taking its stock market value to
$42.2 billion. Berkshire Hathaway’s
class A shares rose by 0.5 per cent, or
$2,758, to $519,760.timely boost for 888
has changed, the world has
changed.”
The leap in the share price when
the revised deal was announced
suggested strong approval for the
new cut-price terms — down from
an enterprise value of £2.2 billion
to a range of £2.05 billion to
£1.95 billion, depending on an
earnout. But, given the estimated
price tag of £1.5 billion when the
business was put up for sale, it is a
stretch to call even the revised
figure a bargain. Pazner, 47, doesnot demure, insisting that 888 paid
what it needed to land the
“transformational deal”. He added:
“It was a bidding process and when
there’s a bidding process you never
get a bargain, but it was a fair
deal.”
The prize is a seat at the top
table of gambling operators
alongside the likes of Flutter
Entertainment (Paddy Power,
Betfair, Sky Bet), Entain
(Ladbrokes, Coral and
Sportingbet) and Bet365. Afteryears of being seen as a tasty
target for predators, it also moves
888 firmly into the predator camp
and Pazner was quick to make that
clear. “M&A is part of our
strategy,” he said.
He was adamant that William
Hill’s 1,407 betting shops, despite
all the speculation, will remain a
core part of the company. “Retail
is a very successful part of the
formula. It is cash-generative and
contributes a lot to the heritage of
the William Hill brand.”