Does nuclear need subsidies (2)

Further to my recent post, from yesterday's FT:

Hitachi's purchase of the Horizon nuclear power project in the UK has propelled the Japanese engineering group into a new and uncomfortable role: as the owner of an entire atomic-energy enterprise rather than a simple contract reactor builder.

After returning some of Horizon’s cash to its current owners, the German utilities RWE and EOn, Hitachi said it would have paid £670m for Horizon’s land, organisation and building rights – about twice what most analysts had expected.

The 'organisation' is worth naff-all, and the land itself is worth a couple of million at most. The real value is in the vague outline planning permission to build a couple of nukes.

Now, RWE, EOn and Hitachi between them are the experts, they know how much it costs to build and run nukes (including interest on money invested), so all they then need to know is the likely selling price for their electricity, and the estimated net profit is pure rent/monopoly income, and that bit has an estimated value of £700 million.

IF you set up a spreadsheet with the following assumptions:
- £5 billion cost of building a 1,600 MW reactor
- running 75% of the time (i.e. 18 hours a day)
- fifty year life (not unreasonable, there are working nukes nearly that old), and
- average selling price of electricity £70/MWh (which means that out of every 15p you pay for a unit of electricity at home, the generator gets 7p, heck knows where the rest goes).

THEN the IRR is 15%, which is more than the 10% you'd normally expect, but nuclear power generation is very risky - not in terms of safety, but in terms of political risk - so fair enough.

Here's the subsidy bit: that £70/MWh is decided by the government/the regulator, and let's agree that it's a fair return on investment. Everything above that is pure profit/rent, paid for by electricity users. The discount rate for the pure-profit/rent element is much lower, let's call it 10%, so every extra penny on a unit at home (one kWh) is £10/MWH, and every extra £10/MWH has an NPV in today's money of £1 billion over the fifty year life of a reactor.

So I guess that is what Hitachi was gambling on - it was prepared to pay £700 million for the off-chance that they can stampede the UK government into agreeing a price of rather more than £70/MWH. In this instance, it was RWE and EOn who collected the subsidy, the question is, why is the UK government handing out subsidies to power companies, in particular ones owned by Johnny Foreigner like this?