Hinkley Point C moves a step closer as China comes on board
Plans to build a new nuclear power station at Hinkley Point in Somerset took a major step forward in October as EDF and China General Nuclear Power Corporation (CGN) signed a strategic investment agreement (SIA) for its construction and operation. The signings took place in the presence of the Chinese President, Xi Jinping, and the British Prime Minister, David Cameron, in London.
Conditions to allow the Hinkley Point C project to go ahead are now in place, says EDF, with all of the agreements between EDF and the UK government in a final agreed form, as are contracts with the key suppliers. Under the SIA, EDF’s share in Hinkley Point C will be 66.5% and CGN’s will be 33.5%. However, EDF says it intends in due course to bring other investors into the project, without reducing its initial stake below 50%. CGN will make its investment in the UK through a new company called General Nuclear International (GNI).
EDF and CGN also agreed the heads of terms of a wider UK partnership for the joint development of new nuclear power stations at Sizewell in Suffolk and Bradwell in Essex.
However, EDF has still to take a final investment decision on the Hinkley Point project, although the company says that signing of the SIA sets the steps for this to be taken, subject to:
· finalisation of long form documentation based on head of terms agreed in October;
· finalisation by EDF of its financing plan;
· approval by the boards of EDF and CGN; and
· clearance by merger control and other governmental authorities in China and Europe.
EDF Chairman Jean-Bernard Lévy said: ‘Today marks a big step forward for EDF’s 30 year partnership with our Chinese partner CGN. Our ambitious nuclear projects are strongly supported by the governments of the UK, China and France and they will bring benefits to all three countries. I am confident that our experience and ability mean we will successfully deliver Hinkley Point C and subsequent projects. We are planning for a final investment decision within weeks so that we can move forward with construction.’
Reaction to the deal, which has been delayed several times already, was mixed. While welcoming it, the Nuclear Industry Association (NIA) pointed out that signing of the SIA took place two years to the day after EDF Energy reached a deal with government on the strike price for Hinkley Point C. NIA Chairman Lord John Hutton, said: ‘This will be the first new nuclear power station to be built in a generation and the first to be built without state funding. This major infrastructure project will give a vital boost to British industry, creating jobs and prosperity in the south west, as well as important opportunities for the UK’s construction and manufacturing industry.’
The NIA has also welcomed news that contracts with key suppliers have also agreed final terms, meaning that the UK supply chain will also benefit. EDF Energy has announced that more than 60% of the value of the project will go to UK companies.
Environmental and renewables campaign groups and some financial commentators remain unconvinced about the project’s merits, particularly the high support costs. Bloomberg New Energy Finance suggested that Britain could have six times the power generation capacity by investing in wind turbines rather than Hinkley Point C. Others pointed to the contrast between recent subsidy cuts to small-scale renewables projects in the UK and the support for Hinkley point C represented by the strike price.
Reaction from trade unions was broadly positive, with the largest union for nuclear industry employees, Prospect, welcoming the deal with CGN and playing down concerns expressed elsewhere about Chinese involvement in relation to safety and security.
Prospect Deputy General Secretary Garry Graham said: ‘The nuclear sector in the UK is the most highly regulated in the world and, quite rightly, sets the most exacting safety standards. In terms of Hinkley and Sizewell, the Chinese will be investment partners – though they have longer-term aspirations to prove Chinese technology in the highly-regulated UK environment. There is no way that this will be achieved without the practical knowledge and expertise of UK specialists, scientists and engineers, overseen by our members in the Office for Nuclear Regulation. It will also require the use of the UK supply chain to the most exacting standards.’