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Japanese engineering group shelves UK nuclear plans

17 January 2019

Hitachi has scrapped plans to build a nuclear power station in Wales, becoming the second firm in two months to abandon a major nuclear project. The £16bn Wylfa plant on Anglesey in north Wales was meant to be the next in a line of new nuclear plants behind Hinkley Point C but the Japanese conglomerate failed to reach an agreement with the UK government on financing for the project.

Artist's image of the completed Wylfa plant - Image: Horizon Nuclear Power
Artist's image of the completed Wylfa plant - Image: Horizon Nuclear Power

Wales Online said the Japanese group is understood to have been at loggerheads with the UK government over the price paid for electricity produced at the plant, which was to be set significantly lower than that paid to EDF Energy from the new Hinkley Point C nuclear power station being built in Somerset.

The UK government had been willing to take a public stake in the project of at least £5bn to help the project, in a reversal of a decades-long policy of not investing directly in nuclear power.

It was also willing to discuss a guaranteed price of power higher than offshore windfarms, but lower than Hinkley Point C.

Hitachi cited rising construction costs as the direct reason for the Wylfa project’s suspension following a board meeting in Tokyo. The group has already invested £2bn in the project.

The scheme, for two reactors producing 2,900 MW, was touted as bringing £5.7bn and up to 10,000 jobs to the Welsh economy. Welsh Secretary Alun Cairns described the scheme as the "biggest infrastructure project in Wales for a generation".

The 300 people employed by Hitachi’s UK subsidiary overseeing the project, Horizon Nuclear Power, will lose their jobs, as well as around a thousand more in the supply chain. Horizon was also overseeing preparatory work on a site for a second nuclear plant at Oldbury in Gloucestershire.

Duncan Hawthorne, CEO of Horizon said: "We have been in close discussions with the UK Government, in cooperation with the Government of Japan, on the financing and associated commercial arrangements for our project for some years now.

"I am very sorry to say that despite the best efforts of everyone involved we’ve not been able to reach an agreement to the satisfaction of all concerned.

"As a result we will be suspending the development of the Wylfa Newydd project, as well as work related to Oldbury, until a solution can be found. In the meantime we will take steps to reduce our presence but keep the option to resume development in future."

Hitachi said the decision would cost it an estimated 300bn yen (£2.1bn) in expenses, plus another 300bn yen in extraordinary losses.

UK Prime Minister Theresa May said she had discussed the Wylfa plans during a meeting with the Japanese Prime Minister Shinzo Abe, but that in the end it was a commercial decision for the company.

She said: "The Government has been in discussion with them for some time, has been providing support. We do want to see new nuclear as part of our energy mix in the future.

"We also have to make sure that the cost of any energy that is provided by nuclear is at a reasonable level for the consumer."

Tom Greatrex, chief executive of the Nuclear Industry Association, said it was "disappointing, not just for the Wylfa Newydd project but for Anglesey and the nuclear industry as a whole".

"The urgent need for further new nuclear capacity in the UK should not be underestimated, with all but one of the UK's nuclear power plant due to come offline by 2030."

The decision is a serious blow to the government’s energy policy and hopes of attracting major foreign investments post-Brexit. With the planned closure of many existing nuclear and conventional power plants over the next 10 years, the government has a huge hole to fill in the late 2020s and early 2030s.

Toshiba pulled the plug on its proposed new Moorside plant in Cumbria last November, leaving EDF Energy as the only definite player in new nuclear for the UK market. Negotiations continue between EDF and Government over the construction of another new plant at Sizewell in Suffolk.

A Chinese consortium is also proposing a new plant at Bradwell in Essex, but this project is increasingly controversial given doubts about that country’s involvement in UK and European infrastructure projects.

Horizon’s Duncan Hawthorne said the Anglesey site remained "the best site for nuclear development in the UK" and that the company would "keep the option to resume development in future".

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