Caisse de dépôt invests $3.2B in a U.K. nuclear plant

Montreal Gazette

6 days ago

The Caisse du dépôt et placement du Québec is making its first direct investment in a nuclear power plant, putting the equivalent of $3.2 billion in the Sizewell C nuclear power plant project in the United Kingdom.
The Caisse's investment strategy places a strong emphasis on renewable energy, but the institution has never made a direct investment in a nuclear power plant, its senior vice-president and director of infrastructure, Emmanuel Jaclot, said in an interview.
'Numerous studies show that we will need nuclear power if we want to achieve carbon neutrality worldwide by 2050,' Jaclot said.
The U.K. is an ideal location to take this first step, he said.
'We focused on the United Kingdom because there was a sufficiently protective framework for investors, such as the Caisse.'
The 1.7-billion-pound investment represents a 20-per-cent stake in the 3.2 GW project, which will supply electricity for 60 years starting in the late 2030s.
The Caisse is the second-largest investor after the British government, the largest shareholder with 44.9 per cent. Other shareholders include the French company EDF, the British multinational Centrica and Amber Infrastructure.
The announcement was met with surprise, as the Canadian company Brookfield had been expected to be the British government's main partner.
The Sizewell C power plant would reduce the U.K.'s dependence on hydrocarbons and reduce carbon emissions by 9 million tonnes annually.
Environmentalists are divided on nuclear power. It offers an alternative to hydrocarbons for reducing carbon dioxide emissions, but it produces radioactive waste that must be managed over many years.
The U.K. cannot rely on hydroelectricity like Quebec, Jaclot said. Solar and wind power can complete the energy mix, but their output varies depending on weather conditions. Nuclear power offers a more consistent base load.
A hedge against cost overruns
In London, however, the project has been criticized for its cost overruns. The bill is now estimated at 38 billion pounds, almost double the previous estimate of 20 billion.
'It's an extremely expensive project,' Alison Downes, director of the Stop Sizewell C organization, said in a telephone interview. 'It's a risky project, and the history of similar projects has been simply catastrophic in terms of costs and timelines.'
Jaclot said he is well aware that nuclear power plant projects have a history of cost overruns. 'That's obviously something we had in mind when we were thinking about this.'
The risk-sharing model reduces the Caisse's exposure in the event of a problem, he said.
The institution will receive compensation 'from Day 1' during the construction phase. This compensation could be higher if the project is delivered early, or lower in the event of a delay.
The Caisse has a mechanism with the British government that protects its return in the event of cost overruns or significant delays, Jaclot said.
Sizewell C would also be built from the plans of an existing power plant, which would reduce design risks.
'There are a lot of lessons learned that will be incorporated into the project,' he said.
The Caisse did not provide a range for the potential return, but Centrica, another shareholder, suggested a return of 'almost' 11 per cent. The company indicated that performance would remain 'acceptable,' even with cost overruns, according to comments reported by the British daily The Guardian.
The assurances given to investors, however, irritate Downes. She believes the Caisse is taking a reputational risk by embarking on the project.
'The Caisse is certainly happy to have a guaranteed return during construction, but it would be at the expense of British households.'
Household electricity bills would increase by one pound per month to finance the construction of the project, according to estimates, 'with the nuclear plant to deliver cheaper clean power for decades to come once operational,' the U.K. government said in a statement.
A YouGov poll published in June shows 55 per cent of Britons support a new nuclear power station, while 23 per cent are opposed and 22 per cent undecided.
Jaclot said he was aware that nuclear energy production comes with 'a number of risks and potential reputational issues.
'We have really tried to resolve all the issues that could arise around the nuclear program. We have managed, through negotiations with the government, to eliminate most of these risks.'
Ocean Group, Innergex investments
The Caisse also announced Tuesday it and Investissement Québec are investing $145 million to acquire an equal share of marine services company Ocean Group. Founder Gordon Bain and senior management will retain control of the Quebec City-based company.
Economy Minister Christine Fréchette stated that with this investment, the government is ensuring that this Quebec gem remains within the province and 'consolidating Quebec's position in the defence industry.'
And on Monday it finalized the acquisition of Longueuil-based renewable energy company Innergex, with Investissement Québec, Desjardins, and Fondaction joining as shareholders of the now privately held company. The Caisse announced the deal in February, for $13.75 per share and $25 for preferred shares, giving it a value of $10 billion including debt. There are also 14 Swiss institutional investors in the company.