nuclear-news

The Treasury has decided to make an opening offer to EDF of £80 per megawatt hour, the FT has learned, while EDF is holding out for a price of just below £100/Mwh – about twice the current wholesale price of power, according to people familiar with the matter.

The government, which has ruled out any public subsidy for nuclear power, is determined to avoid the perception that it will support new nuclear at any price, even at the risk of the talks collapsing.

Danny Alexander, the Treasury chief secretary, told the Financial Times that “detailed and sensitive negotiations” with EDF were ongoing. He said of nuclear energy: “We want to deliver it but only at the right price.”

EDF insists it needs a price that will guarantee it an adequate return on Hinkley, which could cost up to £14bn, according to some industry estimates. A decent return will allow it to attract outside investors into the project.

The company, the UK arm of the French state-owned utility, has been under pressure to find new partners since Centrica dropped out last week. It is in talks with China Guangdong Nuclear Power, with which it has a long-standing relationship, as well as other state-owned Chinese entities.

EDF has €39.2bn of debt, up from €33.3bn at the end of 2011, and analysts say its credit rating could suffer if it is forced to take 100 per cent of the UK nuclear investment on to its balance sheet. It is understood the company would like to reduce its interest in Hinkley to as little as 51 per cent.
EDF chief executive Henri Proglio said on Thursday that discussions on the “strike price” for Hinkley should be completed by the end of March. Once that is decided, the company will be able to attract new partners and make a final investment decision, company officials say. “We are in negotiations with the UK government. The talks are intense, and we expect to come to a conclusion by the end of the first quarter of this year,” Mr Proglio told a news conference.

Yet some increasingly pessimistic Whitehall officials fear the talks could drag into the summer.

The FT revealed on Monday that EDF is in talks with the Treasury to provide a guarantee to support the financing of third-party investors under George Osborne’s new “UK Guarantees” programme. One person familiar with the talks said senior government figures were still considering the request.