China in line for role in British nuclear deal

Agreement with French power firm EDF may lead to construction of Britain's first reactor in decades, with Chinese assistance on the cards

PUBLISHED : Monday, 07 October, 2013, 12:00am
UPDATED : Monday, 07 October, 2013, 5:46am

Britain may agree with Electricite de France on guaranteeing power prices within weeks, paving the way for the nation's first new nuclear plant in two decades, and a Chinese company could play a major role in it.

EDF has been in talks with Britain on the price for more than a year and delayed an investment decision on the plant at Hinkley Point in southwest England originally planned for 2012.

Britain is trying to encourage the construction of new plants while curbing greenhouse gases and household bills. EDF's plan to build two Areva reactors at the site hinges on the rate it gets for power under a so-called contract-for-difference (CFD) that is agreed on with the government and paid for by consumers.

EDF is seeking a strike price of £95 (HK$1,179) to £99.50 a megawatt-hour for the plant, a person familiar with the talks said in February.

An EDF spokeswoman declined to comment on prices or talks. The Department for Energy and Climate Change said in a statement that a deal must offer "value for money".

Opposition Labour Party proposals to freeze retail power prices for 20 months if it is elected in a 2015 poll would not likely affect Hinkley Point, said Lakis Athanasiou, a utilities analyst at Agency Partners.

"The decision to commit on the back of the CFD contract would have to take place before the election to move forward with the plans EDF have," said Matt Brown, head of Poyry's British management consulting business. "But investments thereafter by EDF in other new nuclear plants might be affected. Increasing regulatory risk at a time when they're taking a long term and high-capital decision isn't helpful."

Brown said Poyry's calculations suggest the strike price needs to be just above £100, assuming a 40-year contract.

EDF is in talks to allow China General Nuclear Power Group to take as much as 49 per cent in Hinkley Point, the Financial Times reported.

The involvement of a Chinese partner is "essential" as the country has recent experience of building Areva's EPR reactors, said George Borovas, head of international nuclear projects at law firm Pillsbury Winthrop Shaw Pittman. "From a financing and a project development point of view, I would expect that lenders to the project and investors in the project would seek and welcome this," he said.

Energy Secretary Ed Davey last month held meetings in China with businesses including China General Nuclear Power Corp, China National Nuclear Corp and State Nuclear Power Technology Corp, according to the energy department. Britain has also signed a memorandum of understanding to allow Rosatom, Russia's state atomic energy company, to invest in British projects.

"The UK is open for business and actively welcomes inward investment to our energy sector," the energy department said. "Any energy company, nuclear or otherwise, that had an interest would need to meet all independent regulatory standards required in the UK and EU."