Wylfa Online Auction Hots Up

by Steve Roberts

The eBay style online auction for land at Wylfa on Anglesey to develop a new nuclear power station is proving a success according to the Nuclear Decommissioning Authority (NDA).

In total there are three lots of strategic development land up for grabs, all located next to existing nuclear reactor sites, with Bradwell in Essex and Oldbury in Gloucestershire joining the local site at Wylfa.

Three groups appear to be in the competition for these sites, with the French energy giant EDF going it alone, while German power giants RWE and E.ON have teamed up, as has a consortium made up of Spanish firm Iberdrola, Scottish and Southern Energy and GDF Suez, the French utility.

Each online auction will end when no further bid is made within 24 hours of the last bid, and it is expected that the final results will be declared together when all sites have a winner.

This process which is said to have already raised the total value of all three sites well over £200 million, leads one to ask how is it possible to value a site with potential for nuclear new build.

As there are very few of these unique locations the sites cannot be viewed in the same way as a piece of real estate in the residential property market, and so the method of valuation is even more subjective than normal.

A key factor in coming to a realistic net present value (NPV) for a site such as Wylfa is how each individual power company will estimate the potential profitability of the proposed location, assuming the plant would have an operating life of at least 40 years.

The Government White Paper on Nuclear Power (2008) estimated the profitability of replacing the UK’s 10GWe of generating capacity, and taking into account costs of decommissioning, construction, financing costs, plant operation and waste disposal, was around £15 billion.

to Ian Jackson in his book Nukenomics (2008), each Areva EPR reactor would generate 1.6 GWe and contribute around £2.4 billion profits at NPV. The rival Westinghouse AP1000 reactor design would generate 1.1 GWe and return about £1.7 bn in profit.

But we should remember that it is possible Wylfa could have 3 AP1000 reactors or 2 Areva EPR reactors, so the site could contribute between £4.8 and £5.1 bn NPV.

So how does this fit into a profit for the power company which makes it economically viable over a 40 year lifetime of a nuclear power station?

Let’s say that Wylfa gets to build 2 Areva EPR reactors, and the plant represents 5% of the overall profit gain, this would suggest a value of around £240 million pounds for the Anglesey site.

Now according to the NDA, the two packets of land for sale at Wylfa, one owned by the NDA the other by EDF, amount to about 438 acres. So on the basis of a value of £240 m, this would put the price of land at about £550,000 an acre for the whole site.

If we consider that the actual site for construction of the two reactors takes up to 50 acres, then each acre of this development land would be worth around £4.8 m.

So in what is a major development for the island with potential to create thousands of construction jobs and thereafter engineering and plant maintenance jobs thereafter, all eyes will be on the NDA online auction results to see who will build and operate the new Wylfa power station.

The winner will still need to meet the requirements of the Strategic Site Assessment (SSA) which is prepared by the Government as well as the normal planning regulations.

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