Wednesday, 6 January 2016

More Daishan EPR delays as EDF ponders financial suicide plan for funding Hinkley C

Further delays at the Daishan EPR project being built in China are hammering another nail in a coffin. The only debate now is whether the coffin will house the Hinkley C project or the whole of EDF. This news coincides with reports that EDF are planning asset sales to fund the Hinkley C project.

It is reported that the Daishan project, quite similar in design to Hinkley C, will not come online before 2017. See

The plant's construction was begun in 2009 and was supposed to be finished in 2013. Given the calamitous history of EPR constructions 2017 would count as a hopeful rather than likely date for a start-up.  I commented earlier how funding the Hinkley C project would lead to the financial downfall of EDF. See

Now reports are being leaked of what sort of assets EDF will have to sell-off in order to fund Hinkley C.

It becomes clear that EDF will have to sell-off profitable assets to fund Hinkley C,  something that is almost universally regarded as at least a rather large gamble or, increasingly, a probable disaster that will sink EDF.  Given that the EPR is proving to be such a turkey in three multibillion projects (Okiluoto, Flammanville and now Daishan) what sort of business decision can it be to fund a fourth project that could break the company? Only a state owned company that controls the (French) state could possibly do such a thing!
Of course in China there is still a lot of state ownership, but even their nuclear interests have become rather more circumspect about EPR prospects. They have told EDF and the UK Treasury that EDF must take the full brunt of any losses on Hinkley C.
Some within EDF may regard the leaks about asset sales as a warning to others within the company, who still want to plough on with the Hinkley C project, about the consequences. Quite apart from the argument about selling off income generating assets to fund something that could be a disastrous financial drain, EDF may find that interest rates on its bond issues jump upwards in line with warnings from ratings agencies that its credit ratings will be downgraded. That would increase the cost of Hinkley C to EDF even further.

And before you wonder about the very large amounts of money being promised by the British Government for this project, let me tell you that the projects at Okiluoto, Flammanville and Daishan are incredibly loss making. Hence even the promises on offer from the UK Government would not go anywhere near insulation of EDF from the losses that it would suffer from if the Hinkley C project also went pear-shaped.

It has been rumoured that some at the British Treasury are hoping that the Hinkley C project will not go ahead. Indeed it may serve their political purposes for them to pretend it is happening whilst hoping secretly that it does not go ahead. The pretence offers an excuse for not funding more renewable energy in the UK in order to meet carbon reduction targets, and it also helps the Treasury in its search for funding from China for various British projects. Even here, however, such hopes may be becoming increasingly wistful as China seeks to limit the loans it is giving to its state owned enterprises, many of whom are heavily in debt and dragging down the  Chinese economy.

See some updated coverage in the Ecologist at


  1. Politically I think it will be hard for the current government go formally scrap Hinkley, but they may be happy for it to slowly wither and die. Alternatively, they may be keen to see construction start towards the end of the current government as it will result in a large number of construction jobs (good politically) without the negative impact on voters bills during this or the next parliament.

    Of course, all of the above suggests EDF and their Chinese partners wish to progress which considering the delays so far doesn't appear to be the case. There is apparently absolutely no work taking place on the Hinkley C site (not even maintenance of the preparation work done to date) and late last year The Ecologist wrote that 65 expert nuclear engineers working on the Hinkley plans stopped work with the designs incomplete.

    There are also the ongoing legal challenges to the CFD, until these are fully resolved there remains a massive amount of investment risk. I also wonder whether the scrapping of support for large scale onshore wind and solar, massive reduction in support under the FiT and reductions in cost of offshore wind will increase the likelihood of the legal challenge succeeding. Whilst I appreciate these have occurred after the initial state and decision was made, I believe that decision was based on the fact that nuclear was supported just like other forms of "low carbon" energy.

    Finally, there remains the fact that with every delay the economics of the project are becoming more and more dubious. For most long term business contracts, the indexation applied is typically RPI or some derivative of this as this gives a close reflection of the business cost increases, not least labour. As I understand it the CFD strike price is CPI linked, which can be 1-2% less than RPI. The recent government changes, such as "National Living Wage" and "Apprenticeship Levy" will just increase the cost of construction further.

  2. It's OLKILUOTO, not Olikuoto. Apart from this mistake, thanx for your article David !

  3. There's another factor to take into account: the increasingly uncertain state of the Chinese economy, as demonstrated by the recent gyrations and stop-trading orders in the Chinese stock market.