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UK to use Regulatory Asset Base (RAB) funding for Wylfa nuclear plant, exposing consumers to financial risk?

Times 13th Jan 2019 Ministers will be forced to pioneer a new way of financing nuclear power after Hitachi walked away from a £16bn plant in north Wales. The suspension of the Japanese giant’s Horizon project on Anglesey, expected to be confirmed at a board meeting tomorrow, will force the government to lure investors with a financing method that would pile costs on to consumers, even before a plant has been built.
Ministers are expected to accelerate plans to introduce regulated asset base (RAB) financing, which is popular in the water and infrastructure sectors, for nuclear plants including the Horizon site. Hitachi’s mothballing of its scheme, which could cost about 400 jobs, will be a damaging blow to Britain’s energy policy.
In November, its Japanese counterpart Toshiba scrapped plans to build a nuclear plant at Moorside in Cumbria. Japan’s withdrawal from the UK market will kill the country’s ambitions to sell reactors around the globe.
It leaves Britain dependent on France’s EDF and the Chinese company CGN. Together they are
building the £20bn Hinkley Point power station in Somerset, and CGN has ambitions to build its own reactors on the Essex coast at Bradwell-on-Sea. Industry insiders said state-controlled CGN could swoop on Anglesey if Hitachi puts the project up for sale. Kepco of South Korea would also be interested.
The project’s collapse follows years of negotiations between Tokyo and London. Last summer Britain agreed to split the equity equally with the Japanese government and Hitachi. Ministers were keen to avoid a repeat of the deal struck with EDF, which guarantees at least £92.50 per
megawatt hour for Hinkley Point’s electricity for 35 years. The Horizon deal would have guaranteed about £75 per megawatt hour, falling to the £50s for future reactors on the site.
However, the Japanese government balked at the risk, and tried to pass the equity on to Japanese utility companies. That triggered nervousness at Hitachi, a conglomerate with interests from train manufacturing to power grids. Nuclear power makes up just 4% of its business.
Shares in Hitachi surged almost 9% on Friday amid speculation about Horizon being halted, despite the company having spent more than £2bn on the plans.
EDF is keen to use RAB financing for Sizewell C in Suffolk, its next UK plant. The funding method, which allows investors to earn a set return, has been used for a huge new sewer beneath London and Terminal 5 at Heathrow. However, the pre-funding formula passes some of the risk of cost overruns on to consumers, and their bills rise even before a project has been completed.
https://www.thetimes.co.uk/article/fce4e714-169e-11e9-9e09-701e9f424b2e

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January 14, 2019 - Posted by | business and costs, politics, UK

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