Hinkley Point go-ahead delayed amid EDF funding doubts
By Paul Homewood
If the UK’s energy strategy was not in enough trouble, more delays and doubt emerge over Hinkley Point.
The Telegraph report:
EDF has delayed its final investment decision on the Hinkley Point new nuclear plant yet again, amid claims it is still struggling to finalise funding for the £18bn project.
The French energy giant had been scheduled to take the long-awaited decision at a board meeting on January 27, but is now thought unlikely to do so until its annual results on February 16 at the earliest.
EDF had said in October it would take the decision within "a few weeks", after unveiling a deal for Chinese nuclear group CGN to take a 33.5pc stake in the project.
But it is reportedly still struggling to find the cash for its own 66.5pc stake, as its finances come under pressure from falling wholesale power prices and its acquisition of Areva’s reactor-making business.
It is now "putting pressure on the [French] state, which owns 84.5pc of EDF, to come up with fresh funds" and looking to find new investors, according to French newspaper Les Echos.
The reports contrast with public statements from Jean-Bernard Lévy, EDF group chief executive, who said as recently as this weekend that Hinkley was ready for a final investment decision and that EDF would take a two-thirds stake.
A UK Government source indicated it remained confident EDF would proceed with Hinkley, which would be the country’s first new nuclear plant in a generation and is expected to deliver 7pc of UK electricity when it is scheduled to start operating in 2025.
But the continued delays to the project – once due to start generating in 2017 – are likely to raise further concerns about the UK’s energy strategy and the prospects for EDF being able to fund a second planned plant at Sizewell as well as a third, Chinese-led plant at Bradwell.
Artist’s impression of the proposed plant Photo: EDF
EDF had said in October that it would look to sell down its stake in Hinkley in due course but that it had “no time pressure to do so”.
Analysts at Bank of America Merrill Lynch said: "The key change with today’s report appears to be that a new financial partner could be a precondition to EDF’s ability to go ahead with the project.
"We estimate a 66.5pc stake in the project implies an equity investment of c€5.5bn in today’s prices, suggesting c€1.3bn in external equity is needed to reduce EDF’s share to just over 50pc."
EDF had originally been expected to use project financing for Hinkley, backed up by up to £16bn in UK Government guarantees via Infrastructure UK.
But Mr Lévy announced in October a “radical change” to what he said was a “more efficient” option of delivering its £12bn share of the project from EDF’s own balance sheet.
It has since emerged the UK had attached a sub-investment grade BB+ credit rating to the project.
The site where Hinkley Point will be built Photo: EDF
Unions in France have raised a series of concerns about EDF’s investment in Hinkley, which comes at a time EDF is shedding up to 6,000 jobs worldwide.
John Sauven, executive director of Greenpeace, said: "The EDF board is clearly rattled as they delay yet again this crucial investment decision. It could well signal curtains for Hinkley.
"EDF managers as well as employee representatives on the board are deeply concerned this project is too risky and too expensive.”
But Peter Atherton, utilities analyst at Jefferies, said he believed Hinkley would still proceed, especially as EDF had already spent £2bn on the project and the French Government wanted to export its reactor technology.
“We are so far down the line it would be staggering if it now collapsed,” he said.
“This is a colossally expensive project that is clearly and always has been a great strain on EDF’s finances – that’s why they brought the partners in and are looking to sell some more of the equity. It is pretty surprising we reach this stage with apparently some questions still unanswered."
A spokesman for the Department of Energy and Climate Change said: "Good progress continues to be made so that Hinkley can provide clean, affordable and secure energy that hardworking families and businesses can rely on now and in the future.”
EDF declined to comment.
It is now ten years since Tony Blair’s government gave the formal go ahead to new nuclear plants, but since then there has been delay after delay. The hoped for start up date of 2023 has already been ditched, and even if a final investment decision is made next month, it is unlikely the plant will be up and running before 2025.
And lurking in the background is Austria’s legal challenge to the EU over what they claim are illegal subsidies. This is just one of the giant risks that are putting off potential investors.
Does anybody in charge of our energy policy actually know what they are doing?