Unable to raise Hinkley C nuclear cash, EDF turns to French government

| 26th January 2016
Hinkley C as it would look, if ever built: 'like building a cathedral inside a cathedral', says one nuclear engineer. Artwork: EDF.
Hinkley C as it would look, if ever built: 'like building a cathedral inside a cathedral', says one nuclear engineer. Artwork: EDF.
Just as EDF was due to make its 'final investment decision' on Hinkley C, writes Oliver Tickell, another delay. In spite of incredibly generous subsidies, the company is unable to finance it. Its last hope is to persuade the French state to take a 10% stake in the doomed project.
EDF managers and employee representatives on the board are deeply concerned this project is too risky and too expensive. All three projects are massively delayed and hugely over budget. There's not a shred of evidence that it'll be fourth time lucky.

It was the decision a lot of people had been waiting for - EDF workers, the UK government, and campaigners for and against nuclear power in the UK.

As reported on The Ecologist today, The EDF board was due to make its 'final investment decision' on its controversial Hinkley Point C nuclear power station in Somerset, England, at a long-scheduled meeting tomorrow.

But now it has emerged in French newspaper reports that the decision has been deferred - indefinitely. No decision is now expected until after EDF presents its accounts on 16th February.

John Sauven, Executive Director of Greenpeace UK - the only national green NGO to campaign visibly on the issue - said today: "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.

"All three EPR projects are massively delayed and hugely over budget. There isn't a shred of evidence that it'll be fourth time lucky in Somerset. The UK government needs to join the 21st century and start backing the renewable technologies that are proven to work, are cheaper than nuclear power, create jobs in the UK and contribute to the fight against climate change."

EDF: 'We haven't got the cash!'

The revelation comes in the French newspaper Les Echos, which has been consistently ahead of the pack with high-level leaks from EDF. According to its report, published today, the parastatal corporation has been unable to raise the full sum - some £18 billion - with which to progress the project:

"Two years ago EDF built a financial plan in which it would take 40-50% of the shares, which allowed it not to consolidate the investment in its accounts and so not to weigh too heavily on its balance sheet. Areva was to hold 10% and foreign shareholders the balance.

"But the difficulties of Areva, coupled with the delayed EPR under construction at Flamanville (Manche), changed last autumn: Areva will not participate in the round, and only Chinese investors (CGN), which see it as a gateway for developing their own reactors in Europe, will participate in the consortium, at 33.5%."

The report goes on to cite the severe financial embarrassment that has overtaken EDF - its collapsing share price, negative credit outlook, increasing nuclear waste disposal liabilities, which just increased by around €10 billion yesterday, steep falls in the French wholesale power price (€37 to €28/MWh) reducing its income by €2 billion a year, and its forced €2.5 billion purchase of  its bankrupt sister company, Areva.

Now EDF is demanding French Government support too

But then comes the surprise: unable to raise funds it needs for Hinkley Point C through open market financing channels, it is asking the French Government to step in with a huge direct investment in the project, according to Les Echos:

"In this context, according to our information, EDF is now putting pressure on the State, its 84.5% shareholder, to find new financing. Since Areva would have contributed up to 10% in the project, EDF wishes to replace it with another entity."

Considering that EDF has been casting around the world in its increasingly desperate search for cash, that can only mean one thing - that the French state should step in to make good the 10% funding gap left in the wake of Areva's financial collapse.

But just consider the implications. First, EDF is itself effectively owned by the French state as 84.5% shareholder.

Second, it is being supported by the British government with a subsidy package of guaranteed index-linked power prices for 35 years at more than double the current wholesale price, plus ceilings on decommissioning and waste disposal costs, plus £10 billion loan finance guarantees, independently valued at over €100 billion over the project lifetime, all giving EDF an estimated 10% per annum return on capital.

Third, unable to obtain open market financing even with this UK energy user and taxpayer-financed package of amazing generosity behind it, it has been forced to turn to a third state-owned entity, China General Nuclear Company (CGN) to take a 33.5% stake in the project.

But now, fourth, even that's not enough - and EDF needs to go back to its owner, the French government, to demand that it takes (or otherwise procures) a direct 10% stake in the project - because no one else will.

If anyone ever needed any convincing that nuclear power is utterly unable to survive in a free market economy, this is it. 

But of course if any such thing happens, that would trigger yet another European Commission investigation into 'illegal state aid' for the Hinkley project. And even it it passes the hurdles, fresh legal challenges would surely follow, and further years of delay.

The final question - will any EPR ever be built?

It's looking increasingly as if the Hinkley C EPR is dead in the water.

The Flamanville EPR in France is facing huge problems with its metallurgical flaws in the reactor vessel and lid and it's odds on that it will never be completed due to the massively escalating costs, delays, and safety uncertainties.

There are also big questions over the Olkiluoto EPR in Finland, as the costs of completing the hugely over-time, over budget reactor may be greater to EDF and Areva than walking away and abandoning the site.

Most likely to be completed is the twin-reactor Taishan EPR in China, which was meant to come in last of the bunch but is now well ahead. However there are widespread suspicions that its reactors, supplied by Areva, may suffer from the same flaws as those at Flamanville, explaining a long delay in construction activity.

So even if it ever is 'built out', Chinese safety regulators may never allow it to be turned on.

Sic transit gloria mundi.



Oliver Tickell edits The Ecologist.

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