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EDF, UK Govt Strike Deal on Nuclear Reactor Build

EDF, UK Govt Strike Deal on Nuclear Reactor Build
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Πεμ, 17 Οκτωβρίου 2013 - 17:29
The U.K. government and Electricite de France SA (EDF.FR) have reached an agreement that will allow the French power giant to take on Chinese partners and build the first new nuclear power plant in England in nearly 30 years, people familiar with the matter said Thursday.
The U.K. government and Electricite de France SA (EDF.FR) have reached an agreement that will allow the French power giant to take on Chinese partners and build the first new nuclear power plant in England in nearly 30 years, people familiar with the matter said Thursday.

The agreement comes after U.K. Chancellor of the Exchequer George Osborne said on a five-day visit in China that Britain will allow Chinese companies to take stakes, including majority stakes, in new nuclear power projects in the country.

The deal, which is expected to be formally sealed and announced Monday, could be a big boost for the U.K. government, which has placed nuclear energy at the heart of its efforts to keep the lights on as polluting coal plants are closed to reduce carbon emissions.

However, the agreement is also likely to be controversial as it grants the French utility returns which could lead to further increases in consumer energy bills at a time when the rising cost of living has become a hot political issue in Britain ahead of elections scheduled for 2015.

EDF is spearheading the U.K. 's nuclear revival with plans to build two new reactors at Hinkley Point in southwest England . The new power plant is estimated to cost about 14 billion pounds ($22.33 billion).

The French energy company will hold the largest stake in the project, with an interest of between 45% to 50%, the people familiar with the matter said.

Two Chinese companies, including China General Nuclear Power Group, will hold a combined minority interest of roughly 30% to 40%, while French nuclear reactor vendor Areva SA (AREVA.FR) will hold a stake of about 10%, these people said.

Partners in the project may bring on other investors at a later date to shoulder part of the investment.

Although Chinese companies already have stakes in regulated U.K. utility assets, such as water companies, gas and power networks and North Sea oil fields, some political opposition is anticipated over their entry into such a strategic industry.

At the same time, the Chinese participation, which highlights the continued difficulties companies still have accessing finance in Europe for huge infrastructure projects, will ease fears about the future of new nuclear power in the U.K., where plans have been beset with delays and concerns over costs.

The deal between the government and EDF centers around a 35-year contract guaranteeing EDF and its potential partners an electricity price for the power from the new plant of GBP92.5 per megawatt hour, roughly double the current wholesale price.

The move gives investors in the project certainty of revenue for their investment to build the two reactors for the plant.

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