May backs Hinkley Deal and takes a golden share

Hinkley Point C CGI image
Hinkley Point C CGI image

After unexpectedly withholding Government consent for the Hinkley Point C new nuclear power station in July, Theresa May has now given the green light for the project. After what was said to be a thorough review to see what should be changed in the deal and address security concerns, the only significant change is to require the Government to consent to ownership changes.

Unsurprisingly both EDF and their Chinese partners CGN have reacted extremely positively to the news and both are expecting to move towards constructing the plant. EDF Energy’s Chief Executive Vincent de Rivaz said: “Today’s announcement is good news for British consumers and gives a huge boost to British industry. We remain fully aligned with the British Government. The solid performance of the EDF Energy’s 15 nuclear reactors underpins our credibility as a nuclear operator and developer in the UK. We will take the risk and responsibility to deliver Hinkley Point C and provide the UK with the reliable low carbon electricity it needs. The experience and expertise gained from restarting new nuclear build in the UK will help following projects be even more competitive”

CGN also issued a statement welcoming the project saying, “We are delighted that the British Government has decided to proceed with the first new nuclear power station for a generation. We are now able to move forward and deliver much needed nuclear capacity at Hinkley Point, Sizewell and Bradwell with our strategic partners, EDF, and provide the UK with safe, reliable and sustainable low-carbon energy.”

Prior to the announcement there had been talk of renegotiating the strike price for electricity from the plant and speaking in the House of Commons Shadow Secretary of State for Business, Energy and Industrial Strategy, Barry Gardiner, again criticised the Government for not doing this. However, Secretary of State Greg Clark said, “Consumers will not pay a penny until the plant is generating. The proposed strike price of £92.50 per MWh, reducing to £89.50 if Sizewell C is built, contains important elements of insurance in case of construction cost overruns and future high gas prices”

While it did seem unlikely that the strike price would be changed there was a lot more speculation that Chinese investment in future projects – and notably at Bradwell where they hope to build a Chinese designed reactor – could be curtailed. However, the final deal merely requires the Government and regulator to approve ownership changes. For Hinkley this is being dealt with via an exchange of letters between EDF and the Government to enshrine this agreement legally. The Government intends this arrangement to be put in place for all future nuclear projects and place greater security scrutiny on nationally significant infrastructure, not solely for nuclear. This will be done for future projects by the Government taking a “golden share” which will allow it to block ownership changes directly.

While the deal has naturally been welcomed by the developers themselves it is widely seen as good news for the supply chain and the industry as a whole. Speaking for the Nuclear Industry Association, its Chief Executive, Tom Greatrex, said, “The Prime Minister’s decision to agree to the Hinkley Point C contract is welcome news for the UK’s nuclear supply chain who are ready to deliver this important national infrastructure project, providing reliable, constant electricity as part of a balanced mix for the future.”

“The positive industrial impact of this project will be enormous with contracts already in place for Welsh steel, pumps made by Scottish companies and nuclear components from across England’s industrial belt. Hinkley is a truly national project which represents an array of opportunities for the supply chain and a secure foundation for the Government’s industrial strategy.”

The announcement is also seen as good news for other developers of new nuclear power stations in the UK. Horizon, who are developing an ABWR based station at Wylfa in Wales, clearly see this as a positive move for their project. Duncan Hawthorne, their Chief Executive, said, “New nuclear is vital for the UK’s future electricity mix and so today’s announcement on Hinkley Point C is good news for the country’s security of supply and clean energy needs. The emphasis must now be on delivering the Government’s vision of a wider nuclear programme in the UK and we remain focused on continuing to make strong progress with our lead Wylfa Newydd project. This includes clearing our tried and tested reactor technology for deployment in the UK, consulting across North Wales on our plans and the huge economic opportunities they will deliver, and working with Government on a deal that delivers at a fair and acceptable price for all.”

Much of the UK nuclear industry has been waiting for commencement of Hinkley to boost supply chain confidence and allow more investment to come forward. This must therefore be seen as a big step forward for the industry.