The National Audit Office (NAO) has released a critical report into the financing deal that the Government entered into for the construction of Hinkley Point C nuclear power station. The report finds that the Government department (originally DECC now BEIS) cannot prove whether the deal represents good value for money – which is very dependent on external factors such as fossil fuel prices.
In particular the NAO finds that the Government constrained its scope for manoeuvre in the negotiations by agreeing the heads of terms 3 years before finalising the arrangement. Also while the Government points to a strength of the deal being that the developer takes the construction risk, the NAO finds that alternatives were possible. By taking some construction risk the Government could have produced a deal which may have led to a lower cost for the bill payer as it would require lower levels on ongoing payments during operation.
Commenting on the report, Tom Greatrex, Chief Executive of the Nuclear Industry Association, said, “Today’s report confirms that Hinkley Point C is competitive with other low carbon projects and recognises that nuclear has both a part to play in the lowest cost decarbonisation of our power supply, and that alternatives would cost more.”
“While, as with other technologies, follow on projects will cost less, the NAO analysis of the strike price also highlights that using a different financing structure could have resulted in a lower strike price. That is something Government should reflect on as other new nuclear projects advance.”