Hinkley Point; will anybody trust this Government now?

Screen Shot 2016-07-29 at 06.20.00

 

The decision to delay the Hinkley Point project while Greg Clark “considers carefully, its implications, will send signals to those wishing to take long term decisions based on stated Government policy.

It seems we have not just got a  a new policy on Europe, but a new Government for whom all bets are off. I didn’t vote Conservative last May, but I accepted the country did and the business decisions I take are based on manifesto promises. It now appears the new broom sweeps not just the old guard out, but (in HP’s case) their policies too.

This is really disruptive (and not in the banal use of the word). Whether big or small, businesses need to plan. EDF planned and decided, so did the Chinese investors who will provide the bulk of the funding for HP. For Somerset, the uncertainty must be considerable, for our nation’s energy policy is on hold.

As with  other major infrastructure projects on our  mind, the building of a new runway for London and the construction of the High Speed Link , Hinkley Point has been the subject of numerous enquiries. This further delay appears petulant and opportunistic.


Let’s not forget that our pension policy is to invest in long term infrastructure to provide income streams that can be used to replace the income of those retiring through the second half of this century.

Hinkley Point would have provided just such an income stream to its investors. The cost of such investment increases sharply when political risk is factored in. Hinkley Point as an investment project is now subject to political risk which was unforeseen. All other projects will be subject to increased political risk as a result.

The “all bets are off” approach adopted by Greg Clark and his colleagues is destabilizing. If, as reported by the BBC, part of the reason for the delay stems from concern that HP will be built with overseas investment, then what hope for those trying to sell to overseas markets?

I agree with Nigel Wilson in questioning the timing of the investment (nuclear power looks an expensive way to generate the 85 million cups of tea HP can power an hour). But I also agree with Stephen Kelly, that politicians should lead and not skulk in the ante-rooms , reacting to business.

Screen Shot 2016-07-29 at 06.19.04

If we were to question HP, it should have been before and not after the EDF Board Meeting. If the Government has other major projects it is reviewing, it should show its hand now.

We need open and transparent Government which does not employ cloak and dagger tactics with business. The deferral of a decision on Hinkley Point , rather than the signing of the deal today, tells me that this Government is capable of any U-turn it chooses to make.

Will anybody be able to plan on that basis?

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , . Bookmark the permalink.

3 Responses to Hinkley Point; will anybody trust this Government now?

  1. John Mather says:

    Henry Are UK pension funds involved in the bond issue of Hinckley? I have not looked at the structure in detail but I guess it is a fully amortised index linked covered bond. Perhaps this would be a better choice to consider than indexed gilts. One such bond I am dealing with at the moment shows 4% + RPI over 18 years

    Are we as a country without the engineers, as you know before entering the pensions world I was a scientist and spent one undergraduate summer working with Taylor Woodrow’s lab in Greenford. Wylfa, Hunterston etc were designed there. Project profits were UK

    The price of electricity at over the reported £90+ seems like this is one v expensive PFI deal where the beneficiaries are not UK based

    Are we not capable of structuring this better or are we willing victims/conspirators in repression

  2. henry tapper says:

    John- I think you are right – and questions have to be asked why UK pension funds have not filled their boots with what looks like an excellent investment proposition.

    The LGPS pooling arrangements were designed for just such and I’m glad you’re getting involved in issuance.

    My point was more about the manner in which we are conducting ourselves rather than the deal itself.

  3. John Mather says:

    Henry if only the pension funds could have an RPI linked revenue stream 20% above market rates for 30+ years instead of the French and Chinese Consortium. Taylor Woodrow’s built Wylfa Hunterston and Hartlepool reactors so we do have the engineers but not the balls or so it seems. Change DB accounting aa the Economist from Warwick so eloquently summarised last week

Leave a Reply