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EDF once again postpones decision on construction of new UK nuclear plant

27 January 2016

According to a French business newspaper, EDF has once again put off a final decision on proceeding with the construction of the Hinkley Point C nuclear power station in the UK because of the financial implications of the massive project. In an exclusive, the newspaper claims that the French state-owned utility is having difficulties raising its share of the £18 billion project. 

Hinkley Point C site - Image: A Franck
Hinkley Point C site - Image: A Franck

According to Les Echos, EDF is struggling to find investors to finance its 66% stake in the project. The remaining third is being underwritten by two Chinese state-owned nuclear groups.

Originally EDF had been planning to take a stake of under 50% in the project, which would have meant it would not have had to consolidate the investment in its accounts and the project would not have weighed too heavily on its balance sheet. But the withdrawal of reactor manufacturer Areva and other non-French investors has meant that more of the burden has ended up on its shoulders.

Alongside this, delays and technical problems with the EPR reactors supplied by Areva to new stations under construction in France and Finland, the same kind due to be installed at the Hinkley site in Somerset, have caused the French state to reorganise the capital base of its nuclear engineering sector. This will involve EDF taking over Areva’s reactor division, causing significant strain to its balance sheet at a time when wholesale electricity prices in France have fallen to €28 per megawatt hour (MWh), against group forecasts of €37 for the period, entailing a loss of over €2 billion.

According to Les Echos, instead of giving the final go-ahead to the Hinkley project at the EDF board meeting on January 26 as planned, directors will instead review the legal, organisational and industrial risks and are likely to call for EDF’s 84.5% shareholder, the French state, to provide alternative financing.

A decision to proceed is now unlikely before the next board meeting on February 16, and possibly much later.

According to the BBC, EDF is also having to placate its unions, which fear the project could put the entire company at risk.

But the French group has already ploughed £2bn into Hinkley and with so much political capital invested by the French and British governments, the BBC says it would be “astonishing” if EDF was to fall at the final hurdle.

This is particularly so given the generous price the UK government has agreed to pay for Hinkley Point C-generated electricity - £92.50 per MWh -  or more than double the current UK wholesale electricity price.

In 2007, EDF said it hoped to be generating electricity at Hinkley Point C by the end of 2017 at a price of £45 per MWh, but has repeatedly postponed a final decision on whether to go ahead with the project.

Update: On February 1, the Daily Telegraph reported that the planned developer of the second new nuclear power station in the UK, Hitachi of Japan, had “very serious concerns” about the lack of progress at Hinkley.

Hitachi chairman and CEO Hiroaki Nakanishi said the group was in talks with the UK government over the viability of building a new nuclear plant at Wylfa in Wales. He said EDF’s difficulties raising capital for Hinkley and dependence on Chinese financial support could affect his group’s willingness to proceed with the project.

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