2015 – A Critical Year for New Nuclear Power in UK

There is now deep uncertainty in the nuclear industry about EPR reactors and the complexity of the design. As well as the problems in Finland, the EPR reactor being built by EDF at Flamanville in Northern France is also years late. The concern has spread well beyond the UK.

nuClear News Jan 15 “………Last month we reported that it was still unclear exactly who would invest in EDF Energy’s

proposed new reactors at Hinkley Point in Somerset. According to the Department of Energy and Climate Change (DECC) China National Nuclear Corporation (CNNC) and China General Nuclear Power Corporation (CGNPC) could take up to a combined 40% share of the equity; (China Daily most recently said the Chinese are discussing an estimated 35% stake (1)) EDF could take 45-50%, and Areva 10%, and discussions have been ongoing with other interested parties – possibly the Saudis (2) and Qataris (3) – who might take 10-15%.

But BuildingMagazine claimed that reports the Saudis might be interested in investing are untrue. (4) And

Areva’s financial problems make its 10% share look increasingly unlikely. (5) The Company is

struggling to survive the ongoing mess of the Olkiluoto nuclear plant in Finland. The plant is

years behind schedule and billions over budget. Areva’s losses in Finland are currently

estimated at €3.9bn and the excess costs involved are now the subject of a bitter dispute with

the Finnish utility TVO.

Now, Nick Butler writing in the Financial Times says financing of the deal has still not been

settled – several potential investors have backed away despite the promise of a 35-year indexlinked

price guarantee backed by the UK taxpayer. Butler says the Kuwaitis, the Qataris, the

Saudi Electric Company and even Hermes, the UK based investment fund — have all been

mentioned as possible investors but none has signed up. The fact that nothing has been said

since the Chinese Premier’s visit last June about the two Chinese nuclear companies investing

suggests that they may have cooled on the prospective investment.

There is now deep uncertainty in the nuclear industry about EPR reactors and the complexity of

the design. As well as the problems in Finland, the EPR reactor being built by EDF at Flamanville

in Northern France is also years late. The concern has spread well beyond the UK.

In India there

is pressure for a renegotiation of the tentative deal under which Areva is due to build a new

reactor at Jaitapur. In December, the Indian Prime Minister Narendra Modi signed a deal to

bring in Russian technology which looks decidedly cheaper and more technically reliable.

In fact, the hiatus over the funding of Hinkley Point may not be such bad news for either UK

consumers or the company, says Butler, Government backed funding would be materially

cheaper than going to outside investors who would inevitably require a risk premium, or even

more expensive financial guarantees. The UK government can borrow more cheaply than almost

anyone in the world. A different approach to funding would allow the terms of the deal to be

renegotiated and made less generous. And most important of all, as funders of last resort, the

UK government could make their investment contingent on the company demonstrating that

either Flamanville or Olkiluoto can actually be commissioned and start production and that all

the lessons of the two failures have been learnt. That last step clearly requires a full,

independent appraisal of what has gone wrong with the other projects. That will delay the start

up of Hinkley, but a limited delay would be better than proceeding at huge expense with

unproven technology. (6) http://www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo70.pdf

January 14, 2015 - Posted by Christina Macpherson | business and costs, politics, UK

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