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Hinkley Point C nuclear plant deal close to agreement

08 October 2013

A contract to build the UK's first nuclear plant in a generation is said to be within weeks of completion. Energy Minister Michael Fallon told the Financial Times he was working intensely to seal a deal for the £14bn Hinkley Point C reactor in Somerset. Long negotiations have taken place with France's EDF over the price it could charge for the electricity generated.

Government approval to build the first in a planned set of new nuclear sites in the UK was granted in March.

Ministers are considering the UK bearing some of the construction risk for the £14bn project, in return for a lower subsidy level and a share of the returns if a refinancing leaves EDF enjoying large profits.

An agreement will see the energy company a guaranteed “strike price”, reported to be between £90 and £93, for each megawatt-hour of electricity Hinkley generates over a 35-year contract.

The market price of power — currently about £50 — will be topped up to the strike price with subsidies, paid for by levies on all UK energy consumers’ bills. This potentially commits bill-payers to tens of billions of pounds in subsidies over the lifetime of the plant.

So-called “gain-sharing” and “pain-sharing” arrangements are yet to be finalised, determining the final strike price EDF is offered. However, the issues are understood to be close to resolution.

Talks between EDF and the government to agree on a contract stalled earlier this year over the guaranteed price at which the electricity could be sold.

China Guangdong Nuclear Power Group has a co-operation agreement with EDF and could claim a stake of up to 49% in the project, the FT reports.

The government's plan to meet its emissions reduction and renewable energy targets were outlined in last year's Energy Bill. It hopes the UK can become more self-sufficient in its energy by increasing the use of both nuclear and wind power, as well as other forms of clean sources such as biomass.

He suggested the deal with EDF, which has not commented on the reports, would pave the way for further negotiations on new nuclear plants planned by Japan's Hitachi in Anglesey and Oldbury, in Gloucestershire. There is also said to be interest in further investment in the UK's nuclear sector from companies in South Korea, China and Japan.

Mr Fallon said: "There's intense interest there because people can see that finally we're getting our civil nuclear programme moving again after the long, dead Labour years."

Hinkley Point C will be the third nuclear plant at the Somerset site and will have the potential to provide power for five million homes.

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