Bulk of state funding for nuclear remains ‘unallocated and unknown’

Buying out Chinese state owned CGN’s 20% stake in EDF’s Sizewell C development is likely to be dwarfed by the sum the UK government earmarked to smooth the nuclear project’s progress to financial close, an academic has estimated.

The Budget, published last month, included a new allocation of £1.7 billion direct government funding to enable a final investment decision on one large-scale nuclear project to be achieved during the current Parliament.

EDF’s proposal to build a new plant at Sizewell C, which CGN currently has a one-fifth stake in, is the most advanced of the large-scale nuclear projects in the UK’s pipeline.

Giving evidence to the Parliamentary committee which has been set up to scrutinise the government’s bill to allow the regulated asset base (RAB) model to be applied to nuclear projects, Professor Stephen Thomas of Greenwich University estimated that EDF and CGN had so far spent about £500 million on developing the Sizewell C project.

“£1.7 billion seems a bit too much for that,” he said, adding that CGN will lose interest if plans to develop its own plant at Bradwell in Essex are thwarted, which seems likely due to national security concerns about allowing a Chinese state-controlled company to play a key role in the UK’s energy generation.

Citing the evidence of Prof Thomas, who advised the Labour party on its energy nationalisation plans in the run up to the 2019 general election, shadow energy minister Alan Whitehead said that buying out CGN’s minority stake in Sizewell C is likely to be a “tiny fraction” of the £1.7 billion allocated to nuclear in the Budget.

“It is extremely unlikely—to the point of not being likely at all—that the cost of those arrangements and activities will be anything near £1.7 billion. It will probably be a few hundred million pounds at most.

“That would leave perhaps £1.5 billion unallocated and unknown.”

Whitehead, seeking to amend the bill in a bid to prevent a foreign state-controlled company benefiting from RAB finance, said: “Whatever the £1.7 billion committed to in the Budget is ultimately used for, the involvement of CGN in UK nuclear power over recent years illustrates the risks associated with foreign states, particularly ones of an authoritarian nature, financing and operating critical national infrastructure.”

Responding for the government, energy minister Greg Hands said the Labour amendment threatened to introduce a “blanket exclusion” on developer participation in RAB companies, many of whom are sponsored by close UK government partners, such as EDF.

As well as de-risking a large scale nuclear project, the £1.7 billion could include government investment at the point of a transaction that could help draw in other private sector capital, he said: “Often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking.”

The purpose of the RAB bill is to end the UK’s reliance on overseas developers for nuclear projects by enabling the involvement of British pension funds and institutional investors, Hands said: “The bill is about bringing in more financial options for future nuclear power, not cutting them.”

The Labour amendment was defeated.