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EDF worried that its delays in building Hinkley Point C nuclear station might lessen the huge subsidies it gets from the UK government

 EDF pushes UK government to alter Hinkley Point C penalty clauses. EDF is trying to alter a key subsidy contract to avoid missing out on trillions of pounds in guaranteed revenue after the Covid-19 pandemic caused further delays to Hinkley Point C, the first new nuclear power station under construction in the UK in almost 30 years.

The French utility is in negotiations with the British government over penalty clauses in a
controversial agreement struck in 2013 to finance the building of the plant in Somerset.

EDF started work on the 3.2 gigawatt plant in 2016 but has repeatedly pushed back its completion date while costs have spiraled. In the latest setback, EDF warned in May that the first of Hinkley’s two reactors would not be completed until June 2027, 18 months behind schedule. It attributed 12 months of the delay to Covid-related problems, when it had to reduce staff on site from 5,000 to 1,500.

But the company cautioned that there was the possibility of a further 15-month delay to September 2028,
adding that date could slip again if there was another wave of pandemic or there were knock-on effects from the war in Ukraine.

Penalty clauses in the subsidy agreement — which guarantees a price that is more than double
those offered to developers of rival technologies such as offshore wind — would reduce the 35-year term if Hinkley is not generating electricity by May 2029.

EDF would lose one year of guaranteed payments for every year of delay up to 2033. If the delays extended beyond that date the government has the option to terminate the subsidy contract. EDF has already pushed the construction budget of Hinkley up several times with the revision in May raising the total cost by a further £3bn to as much as £26bn in 2015 prices, compared to an estimate of £18bn in 2016. Crooks said about a third of May’s revision to the budget was Covid-related. About £500mn was down to performance being “less than we would expect”, he added. The other cost overruns were due to issues such as completion of some of the outstanding design work and a failure to accurately estimate the quantities of materials, such as the number of bolts needed, to complete the build.

 FT 21st July 2022

July 22, 2022 - Posted by | business and costs, politics, UK

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