Wednesday, 21 October 2015

Hinkley C - no progress in two years

The only successful thing about the Hinkley C project is the management of the news to imply that there has been progress in the project. In fact there has been absolutely no progress, certainly not in the financial terms, and in many ways things have got worse. That is compared to two years ago when the UK Government's much criticised terms, for paying EDF £94 per MWh (2015 prices) for 35 years underpinned by a 60 per cent loan guarantee by the Treasury, were given state aid clearance by the EU Commission.

Two years ago it was being reported that Chinese companies were to take between a 30 an 40 per cent equity stake in Hinkley C. It was reported that a 'final investment decision' would be taken by April 2014 and the project would be completed by 2023.

Now we hear blazoned across the media the 'new' breakthrough of a deal between EDF and the Chinese nuclear companies whereby the Chinese will take a one third equity stake in the project. The story goes that a final investment decision will soon be made and the expected completion date is now 2025. So what has changed over the last two years? Well, not the signing of a contract between the British Government and EDF, that is for sure, since no such thing exists. All that has changed, in substance it seems, in 2 years, is that the suggested completion date has been put back by....wait for it....2 years!
If you don't believe me, read for example the latter sections of the article in New Civil Engineer of October 22nd 2013 at
Of course we have so many announcements of an imminent final investment decision over the past three years that their value has now depreciated to vanishing point.

But while nothing of substance has changed on the status of the commercial terms, there has been a major deterioration in technical and financial context of the European Pressurised Reactor (EPR) programme. The reactors being built in Finland and France, which were already overshooting their delivery dates in 2013 are still not finished, and not expected to be finished for some time yet. Major safety flaws have been found in the reactor, which is currently being investigated by the French nuclear regulators.

AREVA, the French state owned nuclear constructor collapsed and is being absorbed into EDF. Incredibly EDF is now reported to be selling off several billion pounds of assets to absorb the consequential liabilities and to fund Hinkley C. Now why would the French state want to take the very high risk of another disastrous project at Hinkley C with the same EPR design and end up shelling out billions of pounds of euros in losses to build a nuclear power station for another country (UK)? I don't know. It sounds mad to me. It is certainly a terrible advert for state ownership of electricity companies. Moody's are warning of a credit ratings downgrade for EDF if they go ahead with Hinkley C.

My own guess is that the British Government is only keeping the PR for the project positive because it hopes to provide a smooth passage for other financial deals it is doing with China, and to preserve at least the appearance of keeping alive the British nuclear power programme.

Supporters of nuclear power like to be charitable and say that if only the Treasury lent the project low interest loans (without insurance,presumably,to make the taxpayer doubly liable!) then the project would get built relatively cheaply. Well, no it wouldn't. For one very simple reason. The Treasury would not know how much to lend. This is  because, despite all the figures bandied around in analyses by the EU Commission and many others, nobody has a good idea of how much the project will cost. The Treasury, to their favour, is not prepared to write EDF a blank cheque. Long may this remain so.

1 comment:

  1. Suppose 10 years is realistic (but it might be more), spending the same amount of money over that time, will bring renewables online, month by month. That is an average of 5 years generation.

    I'm sure China would still be happy to provide the solar panels, and turbine steel, and be mildly involved in tidal projects.