French and Chinese energy groups sign landmark deal to build first new UK nuclear power plant for 20 years
22 October 2015
Work on the proposed Hinkley Point C nuclear power plant in Somerset could begin within weeks following the signature of a wide-ranging agreement between French and Chinese state-owned energy groups EDF and China General Nuclear Power (CGN). The Chinese group has taken a 33.5% stake in Hinkley, with EDF holding the remainder of the project.
Artist's impression of Hinkley Point C - Image: EDF
The deal was hailed by David Cameron and the Chinese president, Xi Jinping, at a joint press conference in London on October 21, with Xi describing Hinkley Point C as the “flagship project of cooperation” in a new era of friendship and collaboration between China and Britain.
EDF said it expected to take a final investment decision and start work on the 3.2 gigawatt (GW) plant by the middle of November. The plant was originally scheduled to open in 2017, but has been hit by a series of delays. On October 21 EDF said it would be built by 2025, although the subsidy agreement with the British government contains a clause allowing the plant to be completed no later than 2033.
EDF said the project's construction costs were now estimated to be £18bn, up from an estimate of £16bn two years ago due to inflation.
The companies also announced preliminary agreements to work together on two more nuclear power stations: Sizewell C in Suffolk and Bradwell B in Essex. Like at Hinkley Point C, EDF will be the main shareholder and operator at Sizewell, while at Bradwell, the project will be two-thirds controlled by CGN and one third by EDF.
For the first time ever outside China, CGN’s Hualong 1GW reactor technology will be used at Bradwell.
Jean-Bernard Levy, chairman of EDF, said the new Somerset power plant would supply 7% of the UK’s electricity, enough to supply 6 million homes with low carbon power.
He said EDF’s 66.5% stake in the Hinkley project might subsequently be reduced to 50%, with other investors being invited to join. He said there was no timeframe for this sale and outside investors could include utilities, nuclear industry players or financial companies.
Levy said EDF would finance its share of the construction of a new station at Hinkley purely from its own resources – either through debt or internal cashflow generated by its existing business. He said this represented a big change from the company’s original plan to finance the scheme through debt and the use of loan guarantees from the UK government.
“We will finance most of the project from the mother company,” Mr Levy said, describing the deal as a “very important event” for the French EPR reactor technology being used at Hinkley.
EDF needs the Chinese investment because it has high levels of debt and is expected to sell about €10bn (£7.4bn) of assets in the next five years. Earlier in October, two ratings agencies warned the company it faced credit-rating downgrades if Hinkley Point C went ahead.
The EPR has faced significant delays and cost overruns at two other sites at Olkiluoto in Finland and Flamanville in France. Another at Taishan in China, being built by EDF and CGN, is now expected to be the first to enter service anywhere in the world.
Vincent de Rivaz, chief executive of EDF Energy, the French group’s UK subsidiary, said the deal with CGN was reached after months of intense negotiations between the three countries.
“It’s the first order for the EPR after many years,” he said. “It’s the first order for reactors in the western hemisphere since the Fukushima accident… It’s very important for the credibility of our nuclear industry.”
Rivaz said that, once the contract was signed, there would be hundreds of workers at the site by the end of the year and that at the peak of construction about 5,600 people would be employed there.
EDF brushed aside security fears about Chinese investment in key UK power infrastructure. “The UK’s robust nuclear regulation ensures that all developers and operators must demonstrate that they meet strict compliance requirements for safety and security,” it said.
The project will be funded by UK consumers through a state-backed subsidy regime that will guarantee EDF is paid £92.50 per megawatt hour (in 2012 money) of electricity produced by the station for 35 years. The station’s lifetime is expected to be 60 years. This compares with around £40 per MWh in 2015.
He Yu, chairman of CGN, said: “Entering the UK’s nuclear market marks a new phase for CGN. At the same time this is also a triple win for the existing nuclear energy partnership between China, France and the UK. CGN is highly committed to delivering safe, cost efficient and sustainable energy and to supporting the UK’s goal of becoming a low carbon society.”
Angus Walker, chair of the National Infrastructure Planning Association (NIPA), welcomed the decision to build the new Hinkley station.
“The signing of the Hinkley Point deal by the Chinese marks a hugely important step forward in securing a stable future for electricity generation in the UK. No other nuclear project is likely to come forward until this one gets the green light; renewables policy is at best uncertain, and fossil fuel generation is switching off at an alarming rate.”
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