New conditions on the controversial agreement with the state-owned firms building the plant – France’s EDF and China’s China General Nuclear Power (CGN) – mean the United Kingdom government will be able to prevent the sale of EDF’s controlling stake prior to the completion of construction.
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China’s CGN welcomed the Hinkley decision and said it was now “able to move forward and deliver” nuclear capacity at two more planned United Kingdom reactors, one of which is expected to be Chinese-designed, as well as financed.
British Secretary of State for Energy Greg Clark said the government will introduce measures to ensure the power plant can’t change hands without its consent.
EDF’s bond yields rose to their highest in two months, while the cost of default insurance for its debt rose more than three percent after news of the deal, which allows the British government to prevent the French state-controlled firm from selling its controlling stake. The government will also be able to intervene in the sale of EDF’s stake once the plant is in operation.
The government said it would proceed with the Hinkley Point C project in Somerset, financed by French and Chinese money, with the proviso that safeguards were included for foreign investment in future infrastructure projects. “This will ensure that significant stakes can not be sold without the Government’s knowledge or consent”.
The move is said to be new national security test for all foreign investment in critical infrastructure, which could hamper Beijing’s goal of developing its own plant at Bradwell in Essex and making a more active investment in Sizewell B in Suffolk.
Seven of the eight now operational nuclear power plants, which turned on in the ’70s and ’80s, are scheduled to be retired between 2023 and 2030.
In the UK, EDF Energy CEO Vincent de Rivaz said EDF’s UK unit would take “the risk and responsibility to deliver Hinkley Point C and provide the UK with the reliable low carbon electricity it needs”.
Steve Thomas, emeritus professor of energy policy at London’s Greenwich University, said there was still “a number of major hurdles to get through before Hinkley can go ahead” including financing at EDF’s end.
An announcement by the United Kingdom government may go far in returning some confidence to the market. Critics have argued that the guaranteed price is too expensive when wholesale electricity prices are now less than half that amount.
May’s decision in July to review the project came little more than a month after Britons voted to leave the European Union in a referendum that forced the resignation of Prime Minister David Cameron – whose administration gave the initial go-ahead to the plan.
“There are still huge outstanding financial, legal and technical obstacles that can’t be brushed under the carpet”, John Sauven, U.K. director at Greenpeace, said in a statement.
Britain awards its first new nuclear power plant site licence for 25 years to French energy giant EDF, which eyes building a station at Hinkley.
A Downing Street spokesman said that Prime Minister Theresa May spoke by phone with French president Francois Hollande before the announcement was made, while Mr Clark spoke with his counterparts in France and China.
Concerns have been raised that the energy landscape has changed in the last few years, since the deal was first backed and the contract negotiated.
“We are satisfied it is a good deal”.
Plans for Hinkley C were put on hold in July after the new United Kingdom prime minister, Theresa May, said she needed time to assess concerns over its high cost, unproven technology and the role of foreign investors.
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“What we have decided is that for critical infrastructure generally we want to make sure our powers in this country are comparable to those of others, to be able to check that national security considerations are taken into account”.
