EPR nuclear plant under construction at Olkiluoto in Finland in 2009 - the year it was due for completion. It may finally be ready in 2018 - or then, it may not. Photo: kallerna via Wkimedia (Public Domain).
EDF may sell €3bn stake in UK nuclear to fund Hinkley C
Terry Macalister / the Guardian & Oliver Tickell
8th January 2016
The cash-strapped French energy giant EDF may sell off profitable stakes in its in its eight existing UK nuclear reactors to raise money for the Hinkley Point C project. But with no example of the EPR design planned for Hinkley even near completion, it may all prove a risk too far.
There is considerable unease in EDF about Hinkley C, which some fear could sink the company altogether. The leak to Les Echos is widely supposed to have come from company insiders determined to scupper the project.
EDF is considering the sale of a €3bn (£2.2bn) stake in its British nuclear business in a bid to raise cash for new Hinkley Point reactors.
Possible buyers would be state-owned Chinese companies, who are already committed partners on the £18bn Somerset project.
EDF could unveil details of a sell-off plan on 16th February, when it is scheduled to release annual financial figures and is expected to give a final investment decision on building Britain's first new reactors for 20 years.
The French daily, Les Echos, reported on Thursday that EDF may reduce its stake in the eight existing nuclear reactors it owns from 80% to 51% by bringing in a new investor as part of a wider €6bn disposal programme.
Industry sources told the Guardian that the possible sell off was only one of a number of different options that were under consideration as the group looked at financing Hinkley Point C and other projects.
They said it was still likely EDF would give the go ahead to Hinkley next month even though it did not have all the financing in place. The project is estimated to cost £18bn, according to EDF, though the European Union has warned it could go as high as £24bn.
EDF under pressure over rising debt and commitments
Centrica, the owner of British Gas, already has a 20% holding but has made clear in the past that it does not want a larger commitment to nuclear, and declined to participate in the Hinkley newbuild scheme.
The entire existing nuclear fleet, made up of advanced gas reactors such as those at Hinkley Point B in Somerset and Dungeness B in Kent, have a book value of €9bn.
EDF struggled to interest anyone else in the Hinkley scheme, which many in the City have deemed over-expensive, so the Chinese would seem first in line to buy into the rest of the EDF nuclear business if it comes up for grabs.
EDF is also said by Les Echos to be considering disposing of a half stake in the Constellation Energy nuclear group in the US, plus a a similar option to ditch its 50% holding in power transmission business RTE.
Over the last six months the company's chief executive, Jean-Bernard Lévy, has made clear he is reviewing various parts of the business in a bid to pay for a range of new commitments and rising debt levels.
EDF has been pressured by the government to buy a stake in its ailing engineering partner, Areva, and must set aside at least €55bn to upgrade its huge fleet of French reactors following safety concerns raised by the Fukushima accident in Japan.
EPR trouble in France, Finland and now China too
It has meanwhile emerged that another EDF project is running late at Taishan in China, where the company is building two 1.75GW reactors to the European Pressurised Reactor (EPR) design, the same as is planned for Hinkley C. The Taishan project is seen as the pilot for Hinkley C, which would also use twin EPR reactors. A further two EPRs are planned for the site.
An article in the Financial Times this week reveals that the target completion date for Taishan, which was originally due to be generating by 2013, has now been set back another year - 'probably'. EDF is in charge of building the reactors for China General Nuclear Power Corp (GGN) - also its partner at Hinkley C.
"The Chinese plant's targeted completion date, originally late 2013, has already been put back once, in part because of safety rules after Fukushima. Now it will probably come online in 2017 - though CGN will not say exactly when", the newspaper reports.
It goes on to quote Zheng Dongshan, CGN senior vice-president: "We must perform a lot of tests, and since it's now a first of a kind, we need to do more tests than we planned. Those tests should have been done already in Finland or France, but we must do them now."
He was referring to the EPR reactors at Olkiluoto in Finland and at Flamanville in France. Both are running at roughly three times over the original cost. Olkiluoto was due to be completed by 2009 and the current target in 2018. Flamanville was meant to be working by 2012 but following the discovery of flaws in its reactor vessel no firm date is set.
And now these long delays in France and Finland, as Zheng indicated, are causing knock-on delays at Taishan.
EDF's 'final investment decision' is looming
This precarious situation raises a deep and serious question for EDF and CGN to consider? Is it wise to commit to the EPRs at Hinkley C until at least one other EPR is working somewhere in the world?
This applies especially to cash-tight EDF. CGN is understandably risk-averse over EPRs and is reportedly demanding an indemnity from EDF against losses at Hinkley C - so that while EDF would only own 66.5% of the project, it would be liable for 100% of any cost overruns.
Meanwhile two legal challenges against the UK government's enormous state aid package for Hinkley C are looming at the European Court: one brought by Austria, now joined by Luxembourg; and one by Germany's Greenpeace Energy cooperative together with other green energy suppliers in Germany and Austria.
There is also considerable unease in EDF about Hinkley C, which some fear could, in a worst-case scenario, sink the company altogether. The leak to Les Echos is widely supposed to have come from company insiders determined to scupper the project.
This leaves two most likely options for the impending 'final investment decision': a refusal; or yet another postponement.
Terry Macalister is energy editor of the Guardian. He has been employed at the paper and website for 12 years and previously worked for the Independent and other national titles.
Oliver Tickell edits The Ecologist.
This article is based on one by Terry McAlister originally published in the Guardian with additional reporting by Oliver Tickell.
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