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Reassurance in a stormy world

30th September 2016

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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After a review that lasted some two months, British Prime Minister Theresa May gave the go-ahead for the Hinkley Point C nuclear power plant (NPP), which will be built by a partnership between France’s State-owned EDF and China General Nuclear Power (CGN), another State-owned entity. Hinkley Point C, Britain’s first new NPP in some 20 years, is now budgeted to cost £18-billion, of which CGN will contribute £6-billion for a 33% share.

Hinkley Point C will provide the country with 7% of its electricity requirements. The power generated by the new plant has a guaranteed minimum price of £92.50/MWh, which is more than double Britain’s current wholesale electricity price. Strikingly, back in 2012 – a mere four years ago – the experts were predicting that non-nuclear fuel costs in 2016 would be twice what they actually are! On the plus side, more than 60% of that £18-billion cost will be spent in Britain, and the project will support 5 000 jobs across the country – not counting the jobs in the construction sector. All construction risk will be borne by EDF and CGN. And the NPP will operate for at least 60 years.

But there are new conditions. Britain’s Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, in a statement to the House of Commons, reported, concerning Hinkley Point C itself: “Government will now be able to prevent the sale of EDF’s controlling stake prior to the completion of construction . . . Existing legal powers, and the new legal framework, will mean that the government is able to intervene in the sale of EDF’s stake once Hinkley is operational.”

London will also introduce a new legal framework for future foreign investment in the UK’s critical infrastructure, which will have three main aspects. “Firstly, after Hinkley, the British government will take a special share in all future nuclear new- build projects,” he said. “This will ensure that significant stakes cannot be sold without the government’s knowledge or consent.” Secondly, developers or operators of nuclear sites will be required to inform the independent Office for Nuclear Regulation (ONR) of any changes in ownership or part of the ownership. This is intended to permit the British government to “advise or direct” the ONR to act to maintain national security in the case of a change in ownership. “And thirdly, the government will significantly reform its approach to the ownership of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security. This will include . . . the introduction of a crosscutting (that is, inter-Ministerial) national security requirement for the continuing government approval of the ownership and control of critical infrastructure.

“These changes will bring Britain’s policy framework for the ownership and control of critical infrastructure in line with other major economies . . . The changes mean that, while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment works in the country’s best interests,” assured Clark.

The new policy is a reminder that the protection of national strategic interests with regard to critical infrastructure does not require total, majority or even significant minority government ownership of such infrastructure (a fact that the Mozambique government, to cite a Southern African example, fully understands). A ‘special’ or ‘golden’ share is all that is required. Many of the great privatisations carried out by the UK in the 1980s saw the British government retain ‘golden shares’ in the privatised companies. (At least some of these were later relinquished when it became clear they were no longer needed.)

However, the fundamental reality remains unchanged – critical national infrastructure in the UK remains in the hands of business, not government, and remains open to foreign investment. Thus, this new policy does not represent any turn against globalisation. In her recent address to the United Nations, May assured that “when the British people voted to leave the European Union, they did not vote to turn inwards or walk away from any of our partners in the world.” (All the available ‘Brexit’ voting research data demolish claims that the outcome of the vote was a rejection of globalisation – see my column in Engineering News July 29, 2016.) Indeed, it can be argued that the new policy serves to ensure continued British support for, and involvement in, globalisation, in a new, darker and more ominous era.

In the past few years, the People’s Republic of China has become more assertive, at times even aggressive, in pressing territorial claims in the East and especially in the South China Seas. These claims often disregard, and sometimes clearly violate, international law. This has caused significant tensions between Beijing and other countries in the region and beyond (‘beyond’ because some of the Chinese claims threaten freedom of navigation, a freedom that is fundamental to the success of the global economy).

These stresses in East Asia are matched at the opposite end of the Eurasian landmass as a result of Russia’s seizure and subsequent annexation of the Crimea in March 2014, followed by war in the south-east of Ukraine, officially between rebels and the Ukrainian government, but in which many, inside and outside Ukraine, believe that Russian troops have taken part. Moscow has always denied this. Although there is officially a ceasefire, in reality the conflict continues, albeit at a low level.

These Great Power stresses affect the globalised economic system to a much greater extent than the terrible conflicts raging at the moment in especially the Middle East. Trade and investment between the major powers are essential for the health of the global economy, but these are now taking place against a background of mutual suspicion that did not exist even five years ago. Yet these flows must continue, and ideally increase, to the benefit of everyone. Putting in place some extra security requirements, whether by the UK or other countries, is a small price to pay to provide the assurance that will allow the most trade and investment flows to continue, even in sensitive sectors.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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