France-China Consortium Agrees to Terms on $26 Billion UK Nuclear Project
Oct. 24, 2013—The British government and France’s EDF Group have agreed on key commercial terms for the construction of a nuclear energy facility in southwest England. It will be the first nuclear plant to be built in the United Kingdom since Sizewell B, which was completed in 1995 after a seven-year construction period.
Under the agreement, a consortium led by EDF Group will build two 1,650-megawatt AREVA-designed European Pressurized Water Reactors (EPRs) at the Hinkley Point site in Somerset. The consortium includes AREVA and two long-time partners of EDF―China General Nuclear Corp. and China National Nuclear Corp. Total project cost is an estimated £16 billion ($26 billion).
The first of the reactors is expected to begin operating in 2023, when the existing nuclear station at the site is set to close. This is the first foray by Chinese firms in the global nuclear market.
Discussions between the U.K. government and EDF on the construction of several new nuclear reactors, including the two at Hinkley Point, have been ongoing for about a year, hinging on a guaranteed fixed “strike price” that EDF would receive for the electricity from at least one new reactor.
The final agreed-upon price was £92.50 per megawatt-hour, roughly twice current wholesale electricity prices. The government is expected to make up the difference between the strike price and the wholesale price. However, EDF said that the strike price could fall to £89.50 if a second plant is built at the Sizewell site. The Hinkley Point agreement runs for 35 years.
U.K. Energy Secretary Ed Davey said that the Hinkley Point project will not affect consumer or industry bills until the plant begins producing electricity. He noted that the government was prepared to submit the agreement to the European Commission for state-aid approval. “We are confident we can argue our case,” he said.
Although the European Commission last week informally decided to exclude nuclear energy as a low-carbon technology in its guidelines for state funding of renewable energy projects, it said investment support for nuclear projects could still be considered on a “case-by-case basis” (see Nuclear Energy Overview, Oct. 17).
Preliminary work at the Hinkley Point site is “well advanced,” AREVA said, and the EPR design has been approved by the U.K. government. Regulators have awarded relevant nuclear site licenses, labor relations agreements are in place and the government has granted permission for construction.
EDF, as lead partner, will have a 45 percent to 50 percent stake in the project. Its Chinese investment partners, CGNC and CNNC, will have a combined 30 percent to 40 percent share, and AREVA will have a 10 percent interest. Other parties could take a share of up to 15 percent.
AREVA said the Hinkley Point project will give the two Chinese companies an opportunity to gain experience in the United Kingdom and support their long-term objective of becoming established nuclear developers in that country “in partnership with the EDF Group.”