EDF and its Chinese partners are on the brink of a deal to build the Hinkley Point nuclear power plant and are preparing to sign a heads of terms agreement during next week’s visit by Chinese president Xi Jinping.
Although the deal is not yet done, with negotiations expected to go to the wire, sources say they are optimistic they will be ready to unveil a major pact that will make clear the first new UK nuclear plant in a generation will go ahead.
Such an agreement would, however, stop short of a final investment decision on the £24.5 billion plant, which would be subject to further formalities and be expected to follow in coming months.
The French and Chinese companies are understood to be working on a five-pronged agreement setting out the terms of their cooperation on Hinkley; on a second EDF-led plant at Sizewell; on a Chinese-led plant at Bradwell in Essex; on cooperating to get Chinese reactor technology approved for use in the UK; and on projects elsewhere in the world.
The key issue thought still to be outstanding is the precise size of the stake in Hinkley to be taken by the Chinese state nuclear groups, China National Nuclear Corporation and the China General Nuclear Power Group.
The Chinese have been reticent to take more than 30pc while EDF, which is already having to retain a larger stake than it hoped, wants them to take 40pc.
An eventual agreement between EDF and the Chinese is expected to run to some 21,000 pages and be subject to further formalities, with a much smaller document forming the basis of next week’s announcement.
The total documentation for Hinkley – including the subsidy contract, loan guarantee and waste transfer with the Government, and contracts with key suppliers – is now estimated to run to some 70,000 pages.
Investors are hoping any agreement will also provide updates on the timescale for first power from Hinkley, a project once due online in 2017 but now not expected until 2024 at the earliest, and on further details on the proposed collaboration at Bradwell.
Under the plans, the Chinese are expected to lead on the development of their 1GW Hualong One reactor design, which could be built in the latter half of the next decade.
President Xi and the Prime Minister are due to attend a UK-China business summit next Wednesday at Mansion House, raising the possibility an agreement could come two years to the day since EDF and the UK Government’s heads of terms subsidy deal.
Under the subsidy deal, Hinkley’s owners will be guaranteed £92.50 for each megawatt-hour of power the plant generates for the next 35 years – roughly double the current market price of power, with the difference ‘topped up’ by consumer-funded subsidies. If the market price of power ever exceeds the guaranteed price, which will be index-linked, EDF will pay back the difference.
At the time, EDF said it wanted only a 45pc to 50pc stake in the project. It has since been forced to absorb the 10pc stake that would have been funded by reactor-maker Areva, after Areva’s financial difficulties resulted in EDF taking over its reactor unit.
EDF has also been unable to attract outside investors to the project, with group chief Jean Bernard-Levy admitting are deterred by the example of delays and cost overruns seen in the construction of EDF’s EPR reactor design in France and Finland.
EDF hopes to attract further investors and sell down its stake once construction is underway.
A spokesman for the Department of Energy and Climate Change said: "Nuclear power is a key part of our low carbon energy mix and will provide safe, reliable and affordable energy for future generations. The UK Government and EDF are continuing to work together to finalise the Hinkley project which will power nearly six million homes and create more than 25,000 jobs. The deal must represent value for money and is subject to approval by Ministers.”
EDF declined to comment.
http://www.telegraph.co.uk/news/earth/energy/nuclearpower/11932229/EDF-and-Chinese-on-brink-of-Hinkley-Point-nuclear-deal.html
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