The Nuclear Free Local Authorities (NFLA) welcomes a report published today by Professor Steve Thomas that highlights the huge financial obstacles that EDF Energy still has to overcome to deliver and develop the Hinkley Point C nuclear power plant in Somerset. (1)
The report comes out of a talk given by Steve Thomas, an Emeritus Professor of Energy Policy of Greenwich University, to a joint seminar organised in Colchester by the NFLA and the groups Stop Hinkley, Together Against Sizewell C and Blackwater Against New Nuclear Group (2). The report was commissioned by the group Theberton and Eastbridge Action Group on Sizewell, which is concerned over the proposed development of the Sizewell C site.
Professor Thomas analyses the core weaknesses of the contract agreed between EDF Energy and the UK Government to develop the Hinkley Point site. Originally priced at around £8bn, the most recent cost estimate to build the plant could be now as high as £23.5bn. Finding such a huge budget would stretch any company to the limit, and EDF has been struggling to find such funds, even with Chinese nuclear utilities having a share in the development.
The core conclusions of the report include:
- When agreeing a contract with the UK Government in 2013, the situation in developing a new nuclear reactor at Hinkley Point looked attractive to EDF.
- Two years on when the deal was further negotiated, the picture had changed dramatically. The only positive development was that the project had survived the European Commission state-aid investigation. Costs and time schedules for HPC were increasing and investment partners that would have left EDF’s share at less than 50 per cent had not emerged, leaving EDF with two thirds of the project to finance.
- Costs and delays at other sites in Olkiluoto, Flamanville and Taishan have escalated, putting more pressure on EDF in funding Hinkley Point C.
- The collapse of Areva has added to the complication and costs to EDF.
- EDF’s profits have been minimal and its credit rating is under pressure giving little scope for equity funding from diverted profits.
- Life extensions of the French fleet of 58 reactors has also emerged as a much larger and more important call on any capital it had available.
- Further quality control problems at Flamanville has meant that the condition necessary to release the main part of the UK credit guarantees could not be met and EDF has had no alternative but to cancel the agreement and fund Hinkley Point C from its own funds.
- The attempt to raise capital provided only half the amount targeted with the French Government providing nearly all the capital raised.
- It is therefore hard to see what options EDF has to raise the capital needed to finance both lifetime extensions in France, Hinkley Point C and to fill the gaping hole in its ‘back-end’ decommissioning provisions.
- EDF’s poor financial performance has necessitated the launch of a massive rescue attempt – ‘Opération Hercule’ – which would split the company into two with the nuclear part, EDF Bleu, going back into full public ownership. This will require huge and potentially unpopular amounts of French public money.
- Perhaps EDF’s best hope of completing Hinkley Point C is if this package includes provisions to assist with the finance of the rest of Hinkley Point C.
Professor Thomas’s detailed assessment leaves the NFLA to believe the financing of Hinkley Point C is precarious to say the least, and the whole project risks running out of money. Alternatives are also difficult to resolve from the UK Government, despite its interest in a new and controversial financing scheme called the ‘Revenue Asset Base’ model, which is being considered for new nuclear projects like Sizewell C.
NFLA Steering Committee Chair, Councillor David Blackburn said:
“The NFLA welcomes this expert and detailed analysis from Professor Steve Thomas which forensically shows that EDF is in deep trouble in financing the Hinkley Point C nuclear power plant – the most expensive nuclear power station that may ever be built. This comes from a myriad of problems the company is having to deal with. At the same time, the price of renewables has halved and continues to reduce. It really is high time for the new UK Government to abandon support for new nuclear reactors which are simply too complicated and expensive to build. With the climate emergency becoming more and more pressing it is time to reboot energy policy towards supporting a wide renewable energy mix, dynamic energy efficiency programmes and battery storage. It looks increasingly possible that EDF may end up in the same situation as RWE, E-on, Toshiba and Hitachi in simply finding new nuclear build impossible to develop. Surely it is time for a renewable and decentralised energy change, and that time is now.”
Ends – for more information please contact Sean Morris, NFLA Secretary, on 00 44 (0)161 234 3244.
Notes for editors:
(1) NFLA New Nuclear Policy 50 which reproduces the Professor Thomas / TEAGS report kindly with their permission, is attached with this media release.
(2) NFLA / TASC / BANNG / Stop Hinkley seminar in Colchester, October 2019