The multi-billion pound Hinkley Point C project is set to encounter further delays and obstacles, following the UK government’s decision on 28 July not to sign the deal that would have given it the green light.
In a move almost as surprising as June’s Brexit vote, the new government postponed the start of the £18bn project, despite EDF, the French government-owned energy company project partner, being poised to sign the contracts that would enable the construction and commissioning programme to begin.
Government ministers will now conduct another review of the deal for Hinkley Point C – the UK’s first nuclear reactor since Sizewell B opened in 1995 – before deciding whether it will proceed. A decision is expected in the autumn.
Hinkley Point C is considered by most politicians to be central to the UK’s bid to develop its own reliable and secure energy supply. Greg Clark, Business, Energy and Industrial Strategy Secretary, confirmed that the government views a nuclear power supply as an important factor in enabling the UK to meet its energy requirements in the future.
The government’s support for Hinkley Point C appears to be undiminished since its prominent supporter, former Prime Minister David Cameron, resigned. New Chancellor Philip Hammond has recently backed its delivery and EDF’s continued commitment is viewed as a clear indication that Europe considers Britain still to be ‘open for business’ following the Brexit vote, and that Hinkley Point C is still deliverable.
The opposition is also in favour of the project’s implementation, and both parties agree that the agreed base price of £92.50 per megawatt-hour (MWh) requires downward renegotiation.
UK nuclear power generation is £27.50 more expensive per MWh than gas power plant-generated energy, and Hinkley Point C could eventually cost British taxpayers almost £30bn in subsidies to EDF and Chinese General Nuclear (CGN), which owns a one-third stake. The subsidy contract is set to run for 35 years.
Despite EDF’s enthusiasm to start on site, a Chinese financing package in place, and widespread political backing, caution appears to be the watchword at present. The French government has agreed a revised timetable that will allow the UK government to conduct its investigations into Hinkley Point C’s viability during the next few months.
If commissioned, the two European Pressurised Reactors (EPRs) are likely to produce seven per cent of Britain’s electricity, which would power six million homes from 2025, when coal-fired energy supplies will no longer exist.
EDF issued a statement describing Hinkley Point C as a ‘unique asset for French and British industries …. that will benefit the nuclear sectors in both countries and support employment at major companies and smaller enterprises’.
David Hall, Cabinet Member for Business, Inward Investment and Policy, at Somerset County Council, published an open letter in the Bridgwater Mercury to Prime Minister, Theresa May, immediately after the announcement of the start date delay.
He wrote: ‘This is a massive scheme that would bring the largest construction project in Europe to Somerset, so I can understand the new Prime Minister and her team wanting to make sure they have had every opportunity to give it their fullest scrutiny.
‘Hinkley Point C is of immense importance and would provide an enormous boost to the local, regional, and indeed, national economy.
‘EDF Energy’s Final Investment Decision is major step forward’.
Mr. Hall offered Somerset County Council’s assistance with the government’s review in order to bring about a ‘quick and positive’ decision on Hinkley Point C.
It is estimated that Hinkley Point C will create 25,000 jobs during its construction phase.
Additionally, the local supply chain opportunities include £225m worth of contracts where local consortia are at preferred bidder status and local suppliers are the recommended suppliers for contracts with a combined value of approximately £100m.
Milsted Langdon is a member of the Professional Services Group, which supports the Hinkley Supply Chain Team (HSCT), and enables local and regional businesses to access Hinkley Point C’s commercial opportunities.
Milsted Langdon Partner Rob Chedzoy commented: “Despite the further delay to the Hinkley Point C decision – which is understandable given the Brexit vote and new government – we remain cautiously confident that the deal will be signed in the autumn.
“The UK’s increasing demand for power will need to be met by 2025 and Hinkley Point C is at present the only realistic solution for bridging the energy gap, short of a major rethink in government policy. The project will bring unprecedented levels of employment, economic growth and new skills to the area.
“Our expert corporate finance, tax and Business Innovation teams are geared up to assist businesses of all sizes which are either actively involved, or considering becoming involved, in submitting tenders for Hinkley Point C projects.
“Through our international network, we have already been actively assisting a sizeable international group in finalising its plans for a local presence through which to service its Hinkley contract.”
Please contact Rob Chedzoy, on firstname.lastname@example.org, or on 01823 445566 to arrange a meeting to discuss how our specialists can help you.