Electricite de France (EDF) and China General Nuclear Power Corp (CGN) have signed a strategic investment agreement to build three new nuclear power plants in the UK as old reactors reach the end of their design life.
EDF will have a 66.5% stake in the 3200MWe Hinkley Point C nuclear plant in southwest England, scheduled to start up in 2025, with CGN taking 33.5%. CGN will provide £6bn ($9.3bn) of the £18bn cost, Vincent de Rivaz, CEO of EDF Energy (UK), told reporters. EDF will consider adding new partners for a 15% stake in the project, but intends to retain more than 50%. CGN will make its investment in the UK through its new company called General Nuclear International (GNI).
Chinese President Xi Jinping and UK Prime Minister David Cameron signed an agreement greenlighting the projects. Hinkley Point C, the first new nuclear plant in the UK since Sizewell B started up in 1995, will meet 7% of the UK's power demand.
EDF has been preparing the site for years and has already lined up £1.3bn of contracts. In 2006 EDF said it envisaged building its first NPP the UK by Christmas 2017. The construction start date later slipped to 2017, with planned completion in 2023, assuming a final investment decision was taken in July 2014. Now the company plans to commission Hinkley in 2025.
The UK government agreed two years ago that Hinkley will get a subsidy of £92.5 for every megawatt-hour it produces for 35 years - more than double the forward-curve price of power for 2020, according to broker data compiled by Bloomberg. The price drops to £89.5/MWh if a station using the same technology goes ahead at the Sizewell C site. "We are confident that in the next few weeks we will have completed the final implementation phase of these agreements," de Rivaz said. A final investment decision on Hinkley will be signed by EDF in the next "few weeks", he added. The EDF and CGN boards will need to give final approval once the "long form" of the agreement is finalised. Clearance by merger control and other governmental authorities in China and Europe will also be required.
The contract for the electricity generated at Hinkley Point C was approved by the European Commission (EC) in October 2014 following a 12 month investigation. The EC concluded that the contract was an appropriate and proportionate way for the UK to meet its need for secure, low carbon energy. The EC has also recently approved the UK's waste transfer contract scheme, which will apply to Hinkley Point C. Under this scheme the full costs of decommissioning and waste management associated with new nuclear plants are set aside during generation and are included in the price of the electricity.
The Hinkley project has already won planning consent, design approval for the EPR reactor and a nuclear site licence. There is a well-developed supply chain with identified preferred bidders who are already heavily involved in construction planning. Training for needed skills is underway and industrial agreements with trade unions are in place.
Hinkley Point C will be equity funded by both companies "at least during a first stage", with EDF fully consolidating the project on its balance sheet. EDF will pay for Hinkley Point C with a corporate financing approach, rather than an earlier mooted option of project finance, de Rivaz said. If the project us delayed or runs over budget, it is not clear how any additional would be divided, Martin Young, analyst at RBC Capital Markets told Bloomberg. To help finance Hinkley, EDF is reviewing assets, according to Jean-Bernard Levy, CEO of EDF in France. "You'd expect EDF to be selling some assets," Young said. "They don't need the distraction of a fragmented portfolio of assets."
Going beyond Hinkley
UK Energy Secretary Amber Rudd said: " 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. EDF Chairman Jean-Bernard Lévy said the agreement " marks a big step forward for EDF's 30-year partnership with our Chinese partner CGN".
CGN Chairman He Yu said: "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." EDF and CGN have been working as industrial partners for 30 years, including a joint venture to build two EPR reactors at Taishan in China using the same technology chosen for Hinkley Point C.
EDF's agreement with CGN also includes construction of a plant at Sizewell, with the French company taking 80% in a joint venture for the cost of developing project, de Rivaz said, but he refused to speculate on the final shareholding. The companies also agreed to develop a 1000MWe NPP at Bradwell using Chinese nuclear technology. CGN plans to take a 66.5% stake with EDF taking the remaining share, de Rivaz said. Once licensed, the technology could be used jointly abroad. The final investment decision for two Sizewell reactors will not be made before 2018, EDF said.
The UK authorities may take at least three years to approve the new Chinese technology for Bradwell and no firm order is expected for five or six years, the company said. EDF and CGN have signed an agreement in principle to undertake regulatory approval (Generic Design Assessment), with the UK nuclear safety regulator, of a UK version of China's third generation HPR1000 (Hualong) reactor. The HPR1000 will be referenced to CGN's Fangchenggang Plant unit 3&4 in China.