Stifel’s take on International Public Partnerships Ltd (LSE:INPP) £250 million commitment to Sizewell C boils down to this: it looks like a good deal for shareholders, even if bill payers are left picking up some of the tab.
The investment, spread over five years, gives INPP a slice of a new nuclear project with its initial cash yield locked in at 6% during construction, and the long-term return (IRR) expected to land in the low teens.
For context, Centrica is forecasting returns above 12% from its stake, so INPP’s numbers are right in the mix.
What about risks? INPP says the big worries, like a nuclear accident, decommissioning, construction overruns, or wild swings in energy prices, are largely hedged away.
The real pinch point is the total construction cost, which could run anywhere from £40.5 billion to £47.7 billion.
If the project ends up on the high or low side, returns could swing by around 1–2%. The project is also heavily leveraged, with 65% funded by debt and most of INPP’s equity stake actually structured as shareholder loans.
Not everyone can jump in: While some investors are keen on these stable, inflation-linked returns, others might steer clear because of internal policies on nuclear energy.
That could mean mixed demand for the shares, though Stifel still rates INPP a buy, even if the price is nearing its 130p target.
On the wider renewables front, the latest UK government auction has increased the maximum price for offshore wind, but cut it for large solar projects.
These “strike prices” are still well above today’s wholesale power price, hinting that electricity bills are likely to stay high, or go higher, over the next few years.