China has ‘plan B’ to take over Hinkley, says former energy secretary

China has a “plan B” to bypass EDF and takeover the Hinkley Point C site, former energy secretary Lord Howell has said.

Speaking in the Lords, he said: “Is my noble friend aware that the Chinese also have a plan B which is to bypass EDF altogether and build two smaller reactors on the Hinkley C site and to do it rather quicker than the present Hinkley C plan?”

Howell told the Times he posed the question following private meetings with delegations from China, adding: “This is the view of informed think tanks and a deduction of the way they must be thinking.”

EDF has struggled to secure financing for the project and is currently negotiating with its 85 per cent shareholder – the French state – to obtain additional capital before making a final investment decision.

Speaking before the Energy and Climate Change Committee in March, EDF Energy chief executive Vincent de Rivaz said a decision was likely to take place around mid-May, but last month French economy minister Emmanuel Macron said a decision might not be made until as late as September. De Rivaz has since been called to reappear before the ECCC to explain the apparent delay.

Meanwhile, EDF has announced both it and its partner in the project, China General Nuclear (CGN), have committed to themselves to an additional £2.7 billion of contingency funding on top of the stated £18 billion price tag. The French energy giant, which has already spent £2.4 billion developing the project, denied suggestions the expected cost had increased.

In a statement it said: “This does not mean that we anticipate any additional costs beyond £18 bn. It simply reflects normal, prudent good practice for any construction project to know that the money would be available in the case of more extreme scenarios.”

Analysts at investment firm Jefferies said the £18 billion figure appeared to be based on the assumption of 100 per cent equity financing for the project – whereby a company raises capital by selling off its own shares – which would eliminate interest costs during construction.

They said if that is the case the costing is “somewhat misleading”: “This project will not be financed by 100% equity as that makes no economic sense. Whether EDF raises debt at the project or corporate level is a matter of choice, but the cost of this finance should be included to give an all-in project cost.”

The analysts said if 65 per cent of the financing came from loans at an interest rate of 4 per cent the project could be expected to cost another £3 billion.

Earlier this week an official at the China National Nuclear Corporation reportedly said the company is still planning to buy a stake in the project.