Energy diplomacy

British cloud over EDF-China General Nuclear Hinkley Point power plant deal

Somerset project meant to be springboard for Beijing’s bigger ambitions to become a key builder of nuclear power facilities overseas

PUBLISHED : Friday, 29 July, 2016, 6:30pm
UPDATED : Tuesday, 23 August, 2016, 11:02am

Britain has put on hold a US$25 billion project to build a nuclear power plant co-financed by France and China, in a move seen as demonstrating a shift in the priorities of the new British leadership.

The government would “consider carefully all the component parts” of the plant to be built in Somerset, England, and decide in autumn whether to go ahead, energy secretary Greg Clark said.

Before Clark’s statement, the board of EDF, the state-owned French energy company leading the project, narrowly voted to move forward with the project, called Hinkley Point C.

The board responded to the energy secretary’s remarks by saying it was confident the government of Prime Minister Theresa May was committed to it.

China has a 33.5 per cent stake in the deal through a consortium led by state-owned China General Nuclear Power Corporation (CGN) Group. The company could not be reached for comment on Friday.

Beijing has ambitions to export its nuclear know-how to developed nations and the Hinkley power station marked the first tangible step towards that goal. Any decision to abandon the deal would be a “blow to China”, said Lin Boqiang, a professor of ­energy policy at Xiamen University. Beijing also wanted to become a key player in building nuclear power projects overseas.

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The Hinkley deal was signed during President Xi Jinping’s state visit to Britain last October, a testament to the dawning of a “golden era” of ties ­between the two nations.

The agreement also called for China’s Hualong One nuclear technology to be considered in another project in southeast England.

A spokeswoman for May’s Department for Business, Energy and Industrial Strategy said it was “only right” for the new government to examine all of the project’s details before making a decision.

The narrow vote by the EDF board to proceed ­reflected concerns within the company over the high up-front costs, while Britain has also questioned whether the price for the energy produced might be too high. According to earlier estimates, the plant would have supplied 7 per cent of Britain’s energy.

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The government signed a 35-year electricity price guarantee contract with EDF in 2013, under which the utility would receive a top-up fee if power prices were below £92.50 (HK$945.7) per megawatt-hour. Presently they are about £40 pounds per MWh.

There have been a lot of calls for other projects to be considered or for this to be taken back to the drawing board
Oliver Salvesen, analyst

Observers were divided over the fate of the deal.

Oliver Salvesen, an analyst at investment bank Jefferies, said the fall in energy prices over the past 12 months made the Hinkley terms appear expensive.

“There have been a lot of calls for other projects to be considered or for this to be taken back to the drawing board,” Salvesen said.

Lin said there was a real possibility the project would be scrapped.

But Feng Zhongping, a European studies specialist at the China Institutes of Contemporary International Relations, said it was just a temporary setback.

“In the long run, Britain’s need for a strong economic ties with China will only increase in the post-Brexit era,” Feng said.

Additional reporting by Reuters