POWER COMPANIES have agreed to pay at least £200m for land to build nuclear power stations in Britain, a much higher price than the government expected.

The bidding went through the £200m figure last week in an eBay-style online auction being run by the Nuclear Decommissioning Authority (NDA). The government agency owns land near three old reactor sites that are being sold to would-be developers of new stations.

Such a high level of interest underlines the attractiveness of nuclear energy at a time when the renewables sector, particularly offshore wind, is faltering. Power companies warned the government this month that several big offshore wind projects would be scrapped unless they get immediate government aid.

Last week Spain’s Iberdrola Renovables, the world’s biggest renewables company and sister firm to Scottish Power, said that it was slashing its investment in UK renewables by 40%.

The NDA’s auction, however, has gone better than expected and it could announce the winners as soon as this week.

Three sites are up for grabs – at Oldbury in Gloucestershire, Wylfa in North Wales, and Bradwell, Essex. Three groups are bidding: EDF, the French electricity giant; a consortium between RWE and Eon, the German utilities companies; and a group comprised of Iberdrola, GDF Suez and Scottish and Southern Energy.

EDF is understood to be bidding only for Bradwell, while the German group is making offers for Oldbury and Wylfa. The Iberdrola team is pitching for all three sites.

The total outlay could go higher than the £200m offered to date. The online auction gives bidders two windows each day in which to submit bids, with a reserve price for each site having been set and bids in increments of £5m accepted.

The auction will close when 24 hours have elapsed without a fresh bid being lodged. Sources close to the situation say bidders have been cautious, with only one or two new offers going in each day to keep the window open, gradually pushing the price up. The government had expected only a few tens of millions for each site.

“It has been a clever way of running the auction because, while the current value of the land is minimal, its option value is very high. If you want to take part in what is expected to be a large programme of new nuclear stations in the UK, you don’t want to miss out, so the temptation for the bidders is to keep going back with incremental bids,” said an industry source.

The run-off engineered by the NDA is reminiscent of the government auction for 3G mobile-phone licences nine years ago – a sell off that raised £22.5 billion.

Each of the three sites are located next to existing nuclear reactors – which should help them to win planning approval.

Whoever wins control of the land will still have to go through a Strategic Siting Assessment – the blueprint for which is still being drawn up by the government – and the ordinary planning process before they can begin construction.

Winning bidders will also have to choose a reactor technology, with two designs being studied for British use by the Nuclear Installations Inspectorate. One design is from Westinghouse, owned by Toshiba of Japan, while the other is from France’s Areva.

Building work is not expected to begin before 2013, making the government’s intention to have new nuclear stations up and running by 2017 appear difficult to achieve.

EDF’s presence at the auction has perplexed some industry observers. The French group is in pole position in the UK, having paid £12.4 billion last year to take over British Energy, the only nuclear power generator. When it bought British Energy, EDF said it planned to build large new reactors at Hinkley Point in Somerset and Sizewell in Suffolk, where British Energy already has reactors. It also owns land at Bradwell, which it has said it could sell in the future.

Industry observers think EDF may be interested in buying the NDA’s Bradwell site and putting it together with its existing holding there so as to make a more valuable lot for auction later. EDF declined to comment yesterday, saying that the auction process was confidential.

Losers in the auction will not necessarily be shut out of the new-build process. A reactor costs about £5 billion and the winning consortia are expected to sign up partners to share the burden.

Vattenfall, the Swedish energy group, is not in the auction but is expected to join the building and operation phase. As there is room for more than one reactor at some of the sites, there is also the prospect that the winning groups could split up, with their members building separate plants.

There is also an expectation that more NDA sites could be opened up to new operators. Nuclear-power groups are particularly excited about the potential of Sellafield, in Cumbria, birthplace of Britain’s nuclear industry.

Although Sellafield is now largely a clean-up site, executives believe it could eventually be home to new reactors and fuel-reprocessing plants.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax