Hinkley to go ahead as China deal reignites new nuclear ambitions

EDF’s Hinkley Point new nuclear project will go ahead within weeks following a six billion pound deal with China to build the first new reactors in a generation.

China’s CGN will take a 33.5 per cent stake in the £18 billion development costs for the Hinkley project as part of a wider deal which paves the way for the Chinese nuclear firm to develop a second new nuclear plant at Sizewell and a nuclear plant of their own design in Essex in which it will take a two thirds stake.

Utility Week understands that EDF intends to make an official announcement confirming the widely reported details later this afternoon. 

The agreement with China is set to reignite the UK’s floundering new nuclear ambitions after almost seven years of protracted negotiations and slipping timetables for the Hinkley Point C project.

A consultation on the Hinkley Point C plans began in 2008 with a final investment decision first expected by 2012 and delivery of the first unit expected in 2017. But since then EDF has faced multiple hurdles including the withdrawal of Centrica as an investment partner, state-aid wrangling with the European Commission over its government-backed financial support and a struggle to find a new investment partner for the project.

Now, 2025 is considered the earliest the plant might produce power.  

When the project delivers, EDF will be in line to earn £92.50/MWh of electricity produced for a 35-year period through the Contracts for Difference regime. But despite the high payout EDF is poised to dispose of assets worth as much as €10 billion in an effort to shore up reserves ahead of the capital intensive Hinkley Point nuclear development project, according to reports.

The Financial Times said over the weekend that the French state-owned utility will tackle its debt pile by selling off its upstream exploration activities at Italian subsidiary Edison, as well as its stake in American nuclear group CEGN.

Late last month credit rating agency S&P said that a decision to go ahead with the Hinkley Point C nuclear new build “will likely lead to a downgrade, given the embedded high execution risks and significant investment needs”.

The highly anticipated deal was timed to coincide with a state visit from President Xi Jinping of China this week which is expected to include deals worth as much as £30 billion.

The increased co-operation between the UK and China has raised concerns over China’s record on human rights and – crucially – its involvement in cyber attacks which could compromise the safety of nuclear sites.