Friday, 28 November 2014

Government implies it may not sign Hinkley C deal before General Election

The Government has refused to confirm that it it will sign a contract with EDF allowing Hinkley C to be built before April 2015, which is only a few weeks before the General Election. This can be seen in the text below which contains an answer to a Parliamentary Question tabled by Caroline Lucas. This evasive response underlines the shaky status of the Hinkley C nuclear project. See the text below:

The Department for Energy and Climate Change has provided the following answer to your written parliamentary question (215723):
To ask the Secretary of State for Energy and Climate Change, whether he plans to sign a contract with EDF for Hinkley C nuclear power station before April 2015; and if he will make a statement. (215723)
Tabled on: 24 November 2014
Matthew Hancock:
The Government is continuing to negotiate with EDF on both the Contract for Difference and the UK Guarantee for Hinkley Point C, and plans to sign a contract in due course.

The answer was submitted on 28 Nov 2014 at 13:36.

The project was supposed to be backed by investments from AREVA and also Chinese state owned nuclear companies, but investment from both of these sources (around half of the total equity capital) is now under question. AREVA, the state-owned French nuclear constructor and parent of the failing EPR reactor design,  is going bust and cannot afford the Hinkley C investment on its current balance sheet. The Chinese nuclear companies apparently want a greater share of the work on the project than EDF is willing to give. This underlines the core of the surviving French interest in the project - the interest of powerful nationalised French corporations to preserve their jobs in a declining industry. They have the power of the state at their disposal, ranged against the political inclinations of the Hollande Presidency to try to stop the nuclear dinosaur that controls the French state from eating up so much of its resources.

Now EDF are courting the Saudis and the Qataris for equity investment. It seems very doubtful, given the catastrophic nature of the EPR building programme so far in France and Finland, that these oil states would consider investing in Hinkley C as an attractive money-making venture. France does have good relations with these countries through arms sales that it makes to them. But, logically, it may be the case that such investments may only be procured if the French (or/and British state) agrees some formula to 'guarantee' the investments made by Qatar/Saudi Arabia.

The UK has already agreed to guarantee two thirds of the notional cost of the project so that EDF can take out a bank loan, (note the word 'notional' as if many people still believe this window dressing). As discussed in other posts, the UK will doubtless be horribly burned for a lot more money than has even been committed now if, as seems all but certain, the project goes wrong. But some guarantee from the French state will also be needed. Has Hollande been bludgeoned into agreeing this? Will the Treasury be suckered into also effectively guaranteeing  part or all of the cost overruns in the likely future debacle? The resources of the British and French states are needed to preserve the French nuclear dinosaur!

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