EDF Energy in the UK has been planning to build a new nuclear station at Hinkley Point in Somerset, in the south west of England, for several years. Despite the British Government agreeing a 'strike price' with EDF Energy in the UK, which guarantees EDF a price of US$141 MWh for generating electricity over 35 years and a debt guarantee, the final investment decision has still not been taken.
The issue was discussed between UK Prime Minister David Cameron and French President Francois Hollande at their meeting in Amiens, north France last week. Although Chinese backers have signed up to fund two thirds of the Hinkley Point project, EDF is struggling to fund the remaining third, following the state bailout of Areva, which manufactures the nuclear reactor.
The project has suffered further delays because of problems at two other sites where nuclear stations based on a similar design to Hinkley are being built. The CEO of EDF, Jean-Bernard Lévy, in September announced a further postponement of the commissioning of the gigantic new nuclear power station at Flamanville in northern France and admitted the price has more than tripled.
Statement from #EDF Chairman Jean-Bernard Levy, regarding #Hinkley Point C project https://t.co/ZgayfM5hDJ
— EDF Energy Comms (@edfenergycomms) March 7, 2016
Levy said the first French third-generation European Pressurized Water reactor (EPR) with a capacity of 1650 MW will cost in the region of US$12 billion — more than three times the original projected cost of US$3.37 billion and fuel loading will not even start until late 2018, six years behind schedule.
Financial Meltdown?
Meanwhile, construction by EDF and Siemens of the Olkiluoto nuclear plant in Finland — based on the same design as Flamanville has also suffered many delays and cost over-runs.
In 2015, EDF's construction partner, Areva, announced huge losses and the French Government is attempting a rescue plan that will include a bailout from EDF. This is turn has had a knock-on to Hinkley, where — despite China General Nuclear Power Corporation (CGN) agreeing to pay a third of the cost of the US$25,5 billion (£18bn) project in exchange for a 33.5percent. stake — EDF is said to be having trouble raising its 66.5 percent of the cost.
Chart of the day: Debt investors already losing faith in #EDF and Hinkley nuclear plan. CDS jumps. pic.twitter.com/HEEFKefzrc
— Andy Critchlow (@baldersdale) March 7, 2016
In its 2015 Annual Results presentation in early February, EDF Energy said:
"Hinkley Point C is a strong project which is fully ready for a final investment decision and successful construction. Final steps are well in hand to enable the full construction phase to be launched very soon."
However, analysts say the repeated postponement of the final investment decision is a sign the company is nervous about making the commitment. The resignation of EDF's finance chief is further evidence that the company's ability to fund the new UK power plant is a huge risk. Sources close to the company says it is likely to ask the UK Government to delay the building of the new plant until EDF's financial position improves.
