Nuclear reaction: the industry’s view on Hinkley

The news that EDF has secured a Chinese investment partner to drive forward the development of the UK’s first nuclear power plant in a generation marks the last, triumphant battle towards a final investment decision.

After the better part of a decade of protracted negotiations the French firm’s drive to deliver the world’s most expensive power station is now expected to begin within weeks.

But the scale and cost of the project have proved to be the dividing factor in the industry’s reaction: while the developers and top government ministers have welcomed the deal, the investment community is clear-eyed about the size of the challenge EDF will face to control the costs of the project.

Meanwhile costs are a concern to green groups too following the heavy cuts to renewable energy support which came just weeks before the deal.

The developers

EDF chairman Jean-Bernard Lévy
“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.”

EDF Energy chief executive Vincent de Rivaz
“Hinkley Point C and successive nuclear projects will guarantee the UK the reliable, secure low-carbon electricity it needs in the future. Nuclear power will save customers money compared with other energy options and provide a huge boost to British industrial strength, jobs and skills both in Britain and abroad. Today’s announcements are also good news in the fight against climate change”

He Yu, chairman of China General Nuclear Power Corporation (CGN)
“Entering the UK’s nuclear market marks a new phase for CGN. At the same time this is also a triple-win for the existing nuclear energy partnership between China, France and the UK. CGN is highly committed to delivering safe, cost efficient, and sustainable energy and to supporting the UK’s goal of becoming a low-carbon society.”

The politicos

Prime Minister David Cameron
“I’m pleased to announce that today we are signing an historic deal to build the Hinkley nuclear power station, providing reliable, affordable energy for nearly six million homes and creating more than 25,000 jobs, all while working together to build a low-carbon future.”

Energy Secretary Amber Rudd
“We are tackling a legacy of under-investment and building energy infrastructure fit for the 21st century as part of our plan to provide the clean, affordable and secure energy that hardworking families and businesses across the country can rely on now and in the future. The UK is open for business and this is a good deal for everyone – Hinkley Point C will continue to meet our robust safety regulations and will power nearly six million households with low-carbon energy, creating over 25,000 jobs and more financial security for working people and their families.

“The government will support new nuclear power stations as we move to a low-carbon future. Hinkley Point C will kick start this and is expected to be followed by more nuclear power stations, including Sizewell in Suffolk and Bradwell in Essex. This will provide essential financial and energy security for generations to come.”

Lord Sassoon, chair of the China Britain Business Council
“Why would they want to turn off a nuclear power station in which they had some ownership? It doesn’t seem terribly logical to me, except in extreme circumstances in which that would be the least of the UK’s problems.”

The investors

RBC Capital
“We now believe that EDF will accelerate a disposal programme to limit the financial impact of the build during construction. As for Sizewell C and Bradwell B, there are many questions, notably around the UK’s need for two further expensive EPRs if a decentralised direction of travel accelerates, and the strike price that could be obtained in a future allocation round of CfDs. The ball is now very much in EDF’s court to elaborate on its strategy and the broad financial parameters.”

Investec
“In our view, France’s recent Energy Law, the Areva partnership, and issues relating to future nuclear decommissioning costs all imply rising headwinds for EDF. To this is now added the potential financial strain imposed by the HPC deal. In practical terms, a long-dated project is the last thing that EDF needs, given the existing pressures on its balance sheet. Unless favourable disposals materialise, we fear the dividend will be a casualty, and we have now integrated a cut from FY16E.”

EY head of energy and utilities, Tony Ward
“This a hugely positive step towards enabling new nuclear build in the UK to progress. It is a vital injection of momentum that can unlock billions of pounds worth of investment in the UK’s energy infrastructure. It also brings to an end a protracted period of negotiation and uncertainty, and puts in place the key remaining precursor to a final investment decision.”

Horizon chief operating officer, Alan Raymant
“Today’s news marks a major step forward for nuclear new build in the UK and we look forward to seeing EDF progress their important project at Hinkley. Nuclear power has a vital role to play in helping meet the country’s energy needs and environmental goals and this sends a firm signal that new build is moving ahead in the UK.”

The greens

Greenpeace UK chief scientist, Doug Parr
“With this deal George Osborne is not so much backing the wrong horse as betting billions of consumers’ money on a nag running backwards. There’s no end in sight for the nuclear industry’s dependence on billion-pound handouts whilst the renewable sector is on the verge of going subsidy free. Backing the former and punishing the latter makes no economic sense whatsoever. Our grandchildren will one day wonder why their bills are propping up a foreign-owned, outdated, and costly nuclear industry instead of supporting cutting-edge UK firms producing cheap clean energy. There’s no other reason for the government to go through with this rotten deal but saving George Osborne’s face.”

REA chief executive Nina Skorupska
“Based on the CfD strike prices the cost to the public for solar is already almost 15 per cent less than for nuclear (on a per unit of electricity basis), but with shorter contracts and with costs continuing to decline. The REA is very interested to understand the government’s vision for decentralised energy production in the UK, which allows communities, homeowners, and businesses to directly take a stake in their energy future.”

UrbanWind chief executive Paul McCullagh
“At the same time as the government is strangling the UK’s green energy sector, we risk handing control of our future energy security to China, as well as inflating energy bills in the future. To suggest that renewable energy subsidies were axed due to the impact they had on homeowner’s energy bills, and then to agree a strike price more than twice the current wholesale price for electricity generated by Hinkley Point, seems utterly backwards.”