The Downing Street review of the Hinkley Point nuclear power project is coming to an end – and a decision will soon have to be made, probably before the end of September. The latest wave of public relations activity from EDF, the company that hopes to build the plant, shows how nervous the company is about the outcome. Given the range of doubts about the costs, the construction risks, the reactor technology and the involvement of the Chinese, that nervousness is well justified. Can EDF come up with an offer that deals with the doubts? If it focuses on substance rather than spin, it is just possible. The choice will be made in Paris. Three steps – each of which reflect such an approach – would help. First, the French state-controlled company should reduce the scale of the Hinkley project. Instead of two reactors, why not just build one? The second step should be to accept that no new reactor will be built unless and until the comparable plant at Flamanville in northern France is completed and working normally. If Flamanville can’t be constructed – it should have been working in 2013 and it is already €6bn over budget, with many regulatory concerns still unresolved – who on earth would want to try to build the same reactor in Britain? The third step is perhaps the most difficult. Some renegotiation of the terms is essential if the trust that EDF has lost in Whitehall and with the wider public is to be restored. Sometimes companies can negotiate too well and can reach terms that are so one-sided as to be unsustainable in the long term. That is where we are with Hinkley. The bottom line is that EDF could rescue the deal if it wants to, along the lines suggested above. But it may be that the moment for a practical solution has passed and that the game now is about who takes the blame if the Hinkley project is scrapped, and who picks up the bill for the money already invested.
FT 5th Sept 2016 read more »
EDF and its Chinese partner could be paid more than £100bn over 35 years for Hinkley Point C’s electricity if the UK government gives the go-ahead to the French utility’s contentious nuclear power station, according to analyses commissioned by the Financial Times. The total revenue that EDF and CGN secure from Hinkley Point C could even be as high as £160bn, said three analysts, depending on assumptions about inflation, plant output and idle time for maintenance. Juan Rodriguez, analyst at AlphaValue, estimated Hinkley Point C’s total revenue in cash terms at £102bn, assuming that the plant ran at 90 per cent capacity for 90 per cent of the time over the duration of the contract. It also assumes an inflation rate of 1 per cent. “That is why [EDF] want to build the Hinkley Point project so badly,” said Mr Rodriguez. “If they manage to build it on time, it will be a cash machine.”
FT 4th Sept 2016 read more »
Should Mrs May give the green light, and the state-backed company manages to build the power station and get it running by the target date of 2025, EDF and its Chinese partner stand to generate a profit of tens of billions of pounds on the £18bn project. Jean-Bernard Lévy, EDF chief executive, said in July that the company expected to make a 9 per cent internal rate of return on its Hinkley investment based on a contract struck with the UK government in 2013. EDF will not say how much that return will equate to in absolute profit. Peter Atherton, analyst at Cornwall Energy and longstanding critic of Hinkley Point C, says most infrastructure investors look for a return of only 6 to 8 per cent. Hinkley Point C should generate between £100bn and £160bn of revenue in cash terms for EDF and CGN over 35 years, after including the impact of inflation on the £92.50 per MWh electricity price across the duration of the contract, according to three analysts. The National Audit Office estimated that the value of the top-up payments has increased from £6.1bn in October 2013 to £29.7bn in March this year. Similar deals involving contracts for difference are expected to be struck for the other five UK nuclear power projects in the pipeline. The first two under consideration by regulators are at Wylfa in north Wales and at Moorside in Cumbria. Both projects are owned by overseas groups. Horizon, responsible for Wylfa, is a subsidiary of Japan’s Hitachi. NuGen, which is behind Moorside, is a joint venture between Toshiba, also of Japan, and Engie, another French utility. The heads of the two projects — Duncan Hawthorne at Horizon and Tom Samson at NuGen — say they expect their plants to cost less than Hinkley Point C, which should mean lower subsidies.
FT 4th Sept 2016 read more »
Theresa May is to meet Chinese leader Xi Jinping for talks following the delay to the Beijing-backed nuclear power station at Hinkley Point. The Prime Minister is due to give her verdict on the £18 billion project later this month, with security implications and the high cost of the energy produced by the Somerset plant among the concerns raised by critics about the scheme. Mrs May’s face-to-face talks with President Xi come at the conclusion of the G20 summit in Hangzhou, where the Prime Minister has sought to win support for the UK as it prepares for life outside the European Union.
ITV 5th Sept 2016 read more »
In her decision as to whether to go ahead with the Chinese-backed Hinkley C nuclear power station – postponed from July apparently because of security concerns – Theresa May will find no better guidance than the advice which has been given to her and her aides while attending the G20 summit in Hangzhou this week. They have reportedly been advised to not to take their mobile phones, and to use temporary replacements while in China. They have also been given temporary email accounts which can be deleted upon return, and to avoid using public charging points for laptops and iPads. Any mobile phones that are taken to China, reports the Sunday Times today, should be concealed in security boxes out of fears that the Chinese security services have developed ways of accessing phones even when they are switched off. If these are genuine concerns, and not the inventions of paranoiac inside MI6 or GCHQ, then they do seem to provide an answer to the Hinkley question: how can Britain possibly trust another country with it nuclear power infrastructure when we can’t trust it not to spy on government aides attending an international summit? Of course we want to encourage trade with China – we want to do business there and for the Chinese to invest here. But to allow involvement in sensitive nuclear power infrastructure seems an odd place to start.
Spectator 4th Sept 2016 read more »
The Government could renegotiate the controversial electricity price deal for the proposed new nuclear plant at Hinkley Point in Somerset if it takes a stake in the project, say experts. Reports this weekend suggest it is preparing to step in with a £6 billion payment to support the scheme, replacing a contentious investment in the plan by a Chinese nuclear group.
Daily Mail 4th Sept 2016 read more »
THE SNP’s energy spokesman has challenged the UK Government to clarify its plans for the controversial Hinkley Point nuclear power station after it was reported that Tory ministers were prepared to pay £6 billion to continue with the project. It was reported that EDF executives have said the UK Government could have to take a stake of up to £6bn in the Hinkley Point nuclear power station to avoid a “disaster” if the Chinese decide to withdraw from the project. SNP Westminster energy spokesperson, Callum McCaig, called for clarity from the UK Government over its position on the scheme and “explain how, at a supposed time of austerity, they can find the money to throw at the nuclear white elephant”.McCaig, said: “This just exposes the Tory hypocrisy on public spending. They impose austerity on Scotland despite the fact the Scottish people clearly rejected them, yet continually find billions for the unnecessary projects that matter to them like nuclear bombs and nuclear power.
The National 5th Sept 2016 read more »