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French officials look for funding options for the EDF project as UK ministers insist they will not shoulder any costs.
France’s Government is putting pressure on UK ministers to provide loan guarantees for the drawn-out construction of its Hinkley Point C nuclear plant in an attempt to ease the financial burden on French state-owned utility EDF.
EDF, which also owns and operates the UK’s current active fleet of nuclear reactors, is paying for most of Hinkley Point C’s construction.
The company said last week that costs for the project are expected to rise again, the second announcement of a major cost increase in less than a year. The cost of completing Hinkley is now expected to be between £31bn (€36.29bn) and £34bn, although if completion is delayed to 2031, costs may rise to £35bn.
These figures from EDF are based on 2015 price values. In today’s terms, once inflation is taken into account, numbers become significantly higher. Less than a year ago, documents revealed that EDF executives were already expecting costs for the project to rise to up £33bn.
EDF also pushed back its completion date last week to 2029 at the earliest, or 2031 in an “unfavourable scenario”. This is more than a decade later than the original deadline of 2017 given in 2007. It is also four years later than the previous deadline of 2027 given in 2022.
Under a contract drawn up a decade ago, before costs had spiralled, the financial burden of any overruns in construction falls on EDF rather than the UK Government. However, French ministers are now demanding state guarantees from the UK, the Financial Times reports. Assurances would allow EDF to issue project-level debt and relieve pressure on the company’s finances, which took a major hit in 2022 after electrical output from the company’s ageing nuclear fleet in France nosedived.China’s General Nuclear Power Group (CGN) holds a 33% stake in Hinkley Point C. Under the companies’ agreement, EDF can ask CGN to pump more capital into Hinkley if costs rise, but a spokesperson for EDF said last year: “The probability that CGN will not fund the project after it has reached its committed equity cap is high.” CGN has since stopped paying for overruns, so EDF is left shouldering all additional costs.
The UK Government insists it will not cover any costs. “Hinkley Point C is not a government project and so any additional costs or schedule overruns are the responsibility of EDF and its partners and in no way will fall on taxpayers,” a spokesperson said.
According to sources familiar with the matter, the proposal being pushed by French officials is similar to an initial offer from the UK Government when the Hinkley contracts were first negotiated in 2014, in which British ministers offered EDF a loan guarantee of £10bn for the project. However, this offer was withdrawn in 2016 when a final investment decision was taken because ministers already had concerns about soaring costs.
Another proposal from France involves changes in contract terms for the construction of the UK’s other flagship nuclear project, Sizewell C, also being built by EDF. Funding for Sizewell differs to Hinkley because it is being part-funded by the public purse, with the UK government also looking to raise £20bn in outside private investment. |
