The economic horror show that is Britain’s Hinkley Point C nuclear project

£18 billion construction cost now almost outweighs EDF’s entire market capitalisation of 22 billion euros. In other words, EDF’s management has bet the entire company on this one project.

Why Britain’s Hinkley nuclear reactor is a horror show, with or without China, South China Morning Post, Tom Holland 30 Aug 16, “…….The new British government of Prime Minister Theresa May would be right to pull the plug, regardless of any Chinese involvement……..

The real problem with the project is its cost. The new nuclear power station was conceived in 2008 in order to help the British government meet its aim of reducing carbon emissions by 80 per cent by 2050, an aim that was itself a vanity project intended to showcase Britain’s supposed environmental leadership. However, the chosen design, the European Pressurised Reactor promoted by the French state-controlled company EDF, remains an untested technology. The first EPR project to go ahead, a power plant in Finland, is currently running nine years behind schedule and more than 100 per cent over budget.

£18 billion (HK$184 billion), which would make it by far the most expensive power station in the world. But that’s only part of the objection. In order to persuade EDF to shoulder the construction costs, in 2013 the British government guaranteed that Hinkley would be able to sell its electricity to the grid at a index-linked price of £92.50 per MWh. At the time, oil was trading at US$120 a barrel, and Britain’s wholesale peak power prices were as much as £80 per MWh. Since then oil and gas prices have tumbled and British electricity prices have slumped to £40 per MWh – less than half the cost of power from Hinkley.

With inflation forecast to have pushed the project’s index-linked guaranteed price up to £120 per MWh by the time it starts generating in 2023, the government itself reckons that subsidising Hinkley’s electricity would cost taxpayers £37 billion over the lifetime of the guarantee. To put that sum into perspective, it is double the cost of replacing Britain’s ageing fleet of intercontinental ballistic missile submarines with an entirely new next-generation nuclear deterrent. Hinkley will produce the world’s most expensive energy by a country mile.

Despite boasting such a gold-plated guarantee, the project has still run into financial trouble. The eye-watering cost of developing the EPR has hammered the share price of EDF, which has fallen 80 per cent since 2008 when the project was conceived. As a result, Hinkley’s

£18 billion construction cost now almost outweighs EDF’s entire market capitalisation of 22 billion euros. In other words, EDF’s management has bet the entire company on this one project. That sober realisation was behind the decision to bring in the state-owned China General Nuclear corporation as a 33 per cent co-investor. Even so, so far this year fears that the cost of building Hinkley will bankrupt EDF have triggered the resignations in protest of two of the French company’s directors, including its finance director.

In short, the Hinkley Point project would be a horror show with or without China’s involvement. …..http://www.scmp.com/week-asia/article/2009502/why-britains-hinkley-nuclear-reactor-horror-show-or-without-china