The Mersey Barrage - finance and promotion: the way forward

The Mersey Tidal Power Barrage in the United Kingdom, the feasibility of which is currently being studied, would generate energy at a very low marginal cost for at least 120 years. However, the capital cost, and therefore the debt service requirement, is very high compared with other generating systems. Capital repayment would be required over a maximum of 25 years. A significant level of subsidy would be needed during this initial period before the full benefits of the very low operating costs could be enjoyed. Against this background a financial structure has been developed with the following major objectives: to promote certainty that the funds could be raised to meet the requirements of the UK Electricity Act for acceptance within the Non-Fossil Fuel Obligation; to ensure that the average cost of capital enabled the sale of energy at the most realistic levels and at a level supported by the Non-Fossil Purchasing Agency; to provide comfort for lenders and investors that the risks inherent in the project were adequately covered and that the probability of the returns reflects the risks taken; to maximise the private sector contributions to the financing of the barrage. Details of the 5 phases of the finance plan are presented. (UK)