Work to begin on Hinkley Point reactor within weeks after China deal signed

Work on the first new nuclear power plant in the UK for 20 years is set to begin within weeks after the French energy company EDF and China’s main nuclear operator agreed a deal on building the £18bn project.

The agreement was hailed by David Cameron and the Chinese president, Xi Jinping, at a joint press conference in London, with Xi describing the Hinkley Point C plant in Somerset as the “flagship project of cooperation” in a new era for China and Britain.

State-owned China General Nuclear Power (CGN) has taken a 33.5% stake in Hinkley, with EDF holding the remainder of the ownership in what critics claim to be the most expensive power plant ever built. The deal was signed off in front of Cameron and Xi.

EDF said it expected to take a final investment decision and start mobilising engineers for the plant, by the middle of next month.

The companies also announced preliminary agreements to work together on two more nuclear power stations: Sizewell C in Suffolk and Bradwell in Essex. The latter has attracted particular criticism because it will give primary ownership of the project to CGN – and use Chinese technology.

The terms for the 3.2GW Hinkley plant have been agreed but the final contract, running to thousands of pages, would be signed in the next few weeks, EDF said.

The plant was originally scheduled to open in 2017 but has been hit by a a series of delays. On Wednesday EDF said it would be constructed by 2025 although the subsidy agreement with the British government contains a clause allowing the plant to be completed no later than 2033.

The deal, backed strongly by the chancellor, George Osborne, is contentious because it commits British energy users to potentially expensive payments to EDF and CGN to supply energy once the plant is built. Homeowners and businesses will need to pay £92.50 per MW hour for Hinkley electricity over 35 years, compared with a current wholesale price of £40.

The arrangement has also raised questions about why Britain is relying on France and China, which has been accused of hacking into other countries’ IT systems, to build a nuclear power station. EDF, which is controlled by the French government, said national security agencies would be involved in checking that Hinkley’s systems were protected.

View image in fullscreen

EDF said the 12.5% increase in construction costs – from an initial estimate of £16bn to £18bn – reflected the impact of inflation since an earlier estimate two years ago. EDF added that the underlying costs had remained stable.

Hinkley Point is scheduled for completion by 2025, eight years later than first suggested, and is intended to provide about 7% of the UK’s energy.

EDF said it had turned down the offer of up to £16bn of UK government loan guarantees and had decided to fund its £12bn share of the project by borrowing in the market because it was likely to be cheaper.

Jean-Bernard Lévy, EDF’s chairman, said: “We are funding it on the EDF group balance sheet for our part, which is two-thirds. We will use the money we borrow or that we generate from EDF operations.”

EDF needs the Chinese investment because it is burdened with high levels of debt and is expected to sell about €10bn (£7.4bn) of assets in the next five years. Earlier in October, two of the world’s biggest ratings agencies warned the company it faced credit-rating downgrades if Hinkley Point went ahead.

The nuclear push has many critics over its cost, the time it takes to build plants and the potential threat to the UK’s national security of having China in control of a plant on UK soil. Osborne’s father-in-law, former energy minister Lord Howell, has described the project as “one of the worst deals ever” for British consumers and industry.

Asked if the government security agencies would be inspecting the site, Levy said: “Yes, of course. Do you imagine that the people in charge of national security just sit in their office and ask for paperwork?”

Rivaz said that, once the contract was signed, there would be hundreds of workers at the site by the end of the year and that at the peak of construction about 5,6oo people would be employed there. Levy said there would be a small number of Chinese workers involved in planning, engineering and project management among thousands of British workers.

He said the deal to build Hinkley was an important event because it was the first order for a nuclear power station in the western hemisphere since the Fukushima disaster in Japan in 2011.

The agreement was welcomed by many in Britain’s business community and bytrade unions, but was derided by Greenpeace, which was angry that the deal is going ahead when solar and wind power face major subsidy cuts.

“Britain’s nuclear future hung in the balance and China came to the rescue. Nevertheless, the deal is good news for investors, for chemical engineers and crucially, for our low-carbon future,” said Andrew Furlong, director of policy at the Institution of Chemical Engineers.

But Doug Parr, chief scientist at Greenpeace, was scathing: “With this deal, George Osborne is not so much backing the wrong horse as betting billions of consumers’ money on a nag running backwards. There’s no end in sight for the nuclear industry’s dependence on billion-pound handouts, whilst the renewable sector is on the verge of going subsidy-free.”