The French government wants the UK to plug a multi-billion-pound budget hole for nuclear power projects that are being built by France’s electricity provider EDF in Britain.
The UK’s request for a contribution is likely to create tensions between Paris, London and the EU. This comes a day after the state-owned EDF revealed that the construction of its new nucleopower at Hinkley Point, Somerset, would be delayed further, costing up to £46bn.
The UK has announced that it will not invest cash in the project. EDF is a major shareholder and its revenues are already guaranteed by the government once it’s up and running.
A French official from the economy ministry and a person familiar with the discussions said that Paris wants a “global” solution to include funding issues for another planned UK facility, Sizewell C.
The official from the French ministry of economy said, “It is a Franco-British issue.” The British government can’t say that EDF must figure out Hinkley Point alone and then ask EDF for money to fund Sizewell. We are determined to find an international solution to complete these projects.
Sizewell, in Suffolk, has a completely different financial structure to Hinkley. This week, the UK announced that it would inject an additional £800mn in state funds. The UK’s total contribution at the £20bn facility, where it is the largest shareholder, will now be £2.5bn. The UK’s partner EDF is not required to invest more money.
The French said that discussions with their British counterparts on different options began several months ago, but they did acknowledge London’s flagging of budgetary restrictions which would need to be considered.
A UK government official downplayed the talks and said that Hinkley Point costs would be EDF’s responsibility.
A senior EDF executive told BBC on Wednesday that EDF “picks up the tab” for cost overruns.
EDF warned on Tuesday that Hinkley Point will not be finished until 2029, four years after its original start date. The two reactors are expected to cost as much as £46bn at current prices, up from a £18bn in 2016 budget.
However, other factors could come into play. Britain’s Prime Minister Rishi sunak took the initiative in removing CGN from Sizewell as an investor. This left that project in desperate need of new private capital. CGN also pulled back its 33.5 percent stake in Hinkley.
The Chinese group has paid its contract payments to Hinkley, but is not obligated to cover over costs. They stopped funding them a few month ago.
A third person involved in the discussions said that “the French don’t really have many levers to play here, but the CGN problem is very real.”
Several people who are close to the group have said that finding private investors to cover the Hinkley shortfall could be difficult, but formulas like state guarantees could also be discussed.
EDF has just emerged from a turbulent financial period and will have to invest heavily in its own country over the next few decades. It was renationalized last year.
“Our goal is to achieve this. . . “It is not our intention to negatively impact EDF’s financial path excessively because of what is happening at Hinkley Point with the delays, and the Chinese partner’s issue.” said the official from the French Economy Ministry.
One UK nuclear industry expert said, however, that EDF’s situation at Hinkley is the result of a deal signed with the UK Government a decade earlier, which was criticized at the time for being too generous towards the French group.
A so-called contract of difference, signed with the government, does not cover construction costs but provides subsidies for future electricity production if power prices drop below a certain threshold.