China’s leading nuclear supplier has set out ambitions to build a series of new reactors in Britain, saying it wants to use a multibillion-pound deal on Hinkley Point to open the door to investment in other countries.
State-owned nuclear group CGN will take a 33.5 per cent stake in the first of three such power stations in the UK under an agreement with France’s EDF.
It will provide £6bn of funding for the £18bn Hinkley project in Somerset, to be led by the French energy group. Construction work on the site will begin within weeks, with hundreds of workers expected to return once a final investment decision — seen as a formality — is taken.
EDF said it intended to bring other investors into the project “in due course”, but would not reduce its stake in Hinkley below 50 per cent.
The strategic accord between EDF and CGN, signed in the presence of China’s president Xi Jinping and UK prime minister David Cameron, also hands the Chinese group a lead role in the design and construction of a future plant at Bradwell, in Essex, in which it will have a 66.5 per cent interest, and a minority stake in another new power station at Sizewell, in Suffolk.
Zheng Dongshan, senior vice-president at CGN, told the Financial Times it would apply next year to UK regulators for approval of its so-called Hualong HPR1000 design, a process that could take up to four years.
“We think we are ready and we will wait for the green light from the UK government,” he said.
Asked if more Chinese-built plants could follow, he replied: “The more we build here, the more the consumer will benefit from lower prices and low carbon energy. So, certainly, if we can build Hinkley Point, then, jointly with EDF, Sizewell and Bradwell, why not in the future?”
Mr Zheng added: “We could apply a good kind of synergy or fleet effect . . . We have our first foot in the UK. This could have a good effect to kick the door of other countries.”
Jean-Bernard Lévy, chairman of EDF, called the signing of the deal “a big step forward” for thegroup’s partnership with CGN. Hundreds of engineers and construction staff would return to the Hinkley site, where work has been all but suspended since the spring, he said.
Hinkley, already years behind schedule, has been given a revised start date of 2025. It will supply 7 per cent of the UK’s electricity needs and is seen as essential by Mr Cameron for meeting Britain’s targeted cuts in carbon emissions and ensuring security of supply.
But the technology to be used has been dogged by delays and cost overruns in France. EDF has officially asked the French energy minister to extend the legal deadline for the commissioning of a similar reactor under construction at Flamanville by three years to 2020, just a month after it announced a further delay of the plant to 2018.
Greenpeace’s UK chief scientist Doug Parr said the deal was a bet “on a nag running backwards”.
He added: “Wherever the French giant has tried to build this type of reactor, there have been endless delays, ballooning costs, and major technical setbacks.”
Moreover, the price to be paid for the electricity generated — guaranteed at £92.50 per megawatt hour — is more than twice the current price in wholesale markets. The Institute for Public Policy Research think-tank urged ministers to take other nuclear projects into public ownership, arguing this could save consumers more than £5bn by 2030. Unite, the trade union, called for more public financing.
Mr Lévy said the price reflected the risks borne by investors. Consumers would benefit if costs were lower than expected. Whether EDF would request a further debt guarantee from the UK government, beyond the £2bn agreed, had yet to be decided. Both companies, meanwhile, intended to meet the cost from their balance sheets. Equity would be used “at least during the first stage”.
This meant the total construction cost of Hinkley would be £6bn lower than a £24bn European Commission estimate.
Critics have also raised security concerns about allowing China a role in Britain’s nuclear future. A second Chinese group, CNNC, is expected to become involved at a later stage, supplying its engineering expertise. It is under direct Beijing government control and states on its website that it “successfully developed the atomic bomb, hydrogen bomb and nuclear submarines” as well as power stations.