“Subsidy for UK nuclear build calls funding into question”

“It’s not a great argument for public ownership. Doing it because private investors won’t touch it“

https://montelnews.com/news/869e9af8-b520-4124-98d5-9a05abeb4cf2/subsidy-for-uk-nuclear-build-calls-funding-into-question

(Montel) The UK’s decision to pump an additional GBP 5.5bn into getting the 3.2 GW Sizewell C nuclear power station to a financial investment decision has triggered more uncertainty about its financing and cost, said industry sources.

Reporting by: Kelly Paul, 03 Sep 2024

“I think there’s a lot of uncertainty about it,” Paul Dorfman, visiting professor at the UK’s University of Sussex, told Montel.

“There are questions around what does it actually mean and will that money be drawn up before 2025 [when a final investment decision is expected].”

“Clearly the decision is already made,” said Steve Thomas, emeritus professor of energy policy at Greenwich University.

Won’t abandon project
“The government is not going to spend GBP 8.5bn [including an original cost estimate and additional payments] then abandon the project. The uncertainty is what proportion investors will take and on what terms, or will we just make it 100% public.”

The UK’s new Labour government is proposing a GBP 5.5bn subsidy scheme aimed at covering Sizewell C’s costs up to and including a final investment, subject to next month’s spending review.

It comes amid a protracted process of trying to attract private investors to Sizewell C, namely via the regulated asset base financing model launched last year, designed to ensure a significant proportion of capital is secured before the construction phase to shore up the contribution of the lead developer, EDF of France.

Yet doubt surrounds the status of private investment into the project, with financially strapped EDF’s share capped at 19.99% after a final decision is taken. The total cost of Sizewell is estimated at GBP 20bn.

“I don’t feel like this equity round has been a resounding success,” Alison Downes, a director at campaign group Stop Sizewell C, told Montel, citing anonymous government sources and pointing to the apparent absence of sovereign wealth and pension funds.

The lack of clarity around final costs and timeline also called into question the role of nuclear in the country’s bid to achieve a decarbonised economy by 2030 and in terms of contributing to its energy security, she added.

“2030 is not the be all and end all but it is a critical part in terms of the government’s goals,” she said.

Greater costs?
Meanwhile, the government could find itself saddled with greater costs as potential investors seek to minimise their share of the risk, the sources said.

“It’s not a great argument for public ownership. Doing it because private investors won’t touch it,” Thomas said.

When contacted by Montel, an energy ministry spokesperson said: “We are committed to Sizewell C, which will play an important role in helping the UK achieve energy security and net zero, while securing thousands of good, skilled jobs and supporting our energy independence beyond 2030.

“Subject to all the relevant approvals, we aim to reach a final investment decision before the end of the year.

“Any investment from the [GBP 5.5bn subsidy] scheme will be subject to approvals and in line with the project’s spending plans, as agreed by the government and its co-shareholders.”

Sizewell C, the company managing the nuclear project, was unavailable for comment when contacted by Montel.