An £18 billion project bankrolled by the governments of China and France to build Britain’s first new nuclear power station in a generation is set to commence “within weeks”, EDF said today.
Hundreds of workers could be starting work on the construction of two new reactors at the site at Hinkley Point in Somerset by the end of the year, said Jean-Bernard Levy, chairman of EDF.
The new Hinkley station, which could start generating electricity in 2025, will generate 7 per cent of UK electricity – or enough to supply 6 million homes with low carbon power.
“It’s going to be a long journey,” said Mr Levy, who added that EDF, a company controlled by the French government, would take the lead with a 66.5 per cent stake in the Hinkley project – representing an investment of £12 billion.
“For the country it’s a very important energy policy decision,”
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The remaining one third will be held by the government of China through a state-controlled energy company, China General Nuclear Power Corp (CGN), which will invest £6 billion.
Mr Levy said EDF might subsequently reduce its stake through a sale of up to 16.5 per cent to outside investors, cutting its overall holding to 50 per cent, plus a controlling share.
“The train is leaving the station but you can still join,” he said. “We are totally open.”
He said there was no timeframe for this sale and outside investors could include utility companies, nuclear industry players or financial firms.
Hinkley Point C will be Britain’s first new nuclear power station since Sizewell B entered service in 1995.
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Vincent de Rivaz, chief executive of EDF Energy, the French group’s UK subsidiary, said the deal with CGN was reached on Sunday after months of intense negotiations between the three countries.
It also includes plans to build a second new nuclear station at Sizewell in Suffolk and a third, using Chinese nuclear technology, at Bradwell in Essex.
The Bradwell B reactor, to be built using China’s Hualong 1,000 megawatt reactor technology, will be developed by a joint venture company two thirds controlled by CGN and one third by EDF.
“The UK’s robust nuclear regulation ensures that all developers and operators must demonstrate that they meet strict compliance requirements for safety and security,” EDF said, brushing aside security fears about Chinese investment in key UK power infrastructure.
The agreement, announced to coincide with a visit to the UK by China’s President Xi Jinping, falls short of a final investment decision, which will take several more weeks finalise, the company said.
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Mr Levy said EDF would finance its share of the construction of a new station at Hinkley purely from its own resources – either through debt or internal cashflows generated by its existing business. He said this represented a “big change” from the company’s original plan to finance the scheme through debt and the use of loan guarantees from the UK government.
“We will finance most of the project from the mother company,” Mr Levy said, describing the deal as a “very important event” for the French EPR reactor technology.
The EPR has faced big delays and cost overruns at two other sites at Olkiluoto in Finland and Flamanville in France.
Another at Taishan in China, being built by EDF and CGN, is now expected to be the first to enter service anywhere in the world.
“It’s the first order for the EPR after many years,” he said. “It’s the first order for reactors in the western hemisphere since the Fukushima accident… It’s very important for the credibility of our nuclear industry.”
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Although EDF said it expected the station to be in service by 2025, EDF will in reality have until 2033 to ensure the station is operational before incurring financial penalties.
The project will be funded by UK consumers through a state-backed subsidy regime that will guarantee EDF is paid £92.50 per megawatt hour (in 2012 money) of electricity produced by the station for 35 years. The station’s lifetime is expected to be 60 years.
He Yu, chairman of CGN, 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. CGN is highly committed to delivering safe, cost efficient and sustainable energy and to supporting the UK’s goal of becoming a low carbon society.”
Angus Walker, chair of the National Infrastructure Planning Association (NIPA), welcomed the decision to build the new Hinkley station.
“The signing of the Hinkley Point deal by the Chinese marks a hugely important step forward in securing a stable future for electricity generation in the UK. No other nuclear project is likely to come forward until this one gets the green light; renewables policy is at best uncertain, and fossil fuel generation is switching off at an alarming rate.”