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EDF, which is building Britain’s first nuclear power plant in 30 years, is fearful of a cash crunch as its Chinese partner may withhold extra funds from the project. EDF, the French-owned energy giant building Hinkley Point C in Somerset, has warned that the Beijing-controlled China General Nuclear (CGN) may not contribute to a fresh round of funding for the UK-based project. It comes as France’s state-owned firm has already had its balance sheet put under strain due to issues with its ageing nuclear reactors that raised major questions over Europe’s energy security and worsened the crisis on the continent.
Now, the £32billion project in Somerset, an estimate that rocketed up from a previous estimate of £26billion due to inflation, may need to be funded via other means. Due to these spiralling construction costs, the plant in south-west England that was originally scheduled to cost £18billion has been hit with repeated delays.
EDF has said that because “the project’s total financing needs exceed the contractual commitment of the shareholders”, both CGN and the French firm would be asked in the second half of 2023 to make “voluntary” additional equity payments under a compensation mechanism for cost overruns.
But as the “probability that CGN will not fund the project after it has reached its committed equity cap is high”, it could leave EDF forced to shoulder more of the costs, under the term of an existing contract.
CGN was first encouraged to help build new British nuclear plants by then-chancellor George Osborne back in 2015 as part of a drive for “golden era” in Anglo-Chinese relations.
Under a deal struck in 2016, the Chinese developer agreed to meet 33.5 percent of the £18billon estimated cost for Hinkley Point C’s construction at the time, with EDF set foot the remaining bill.
But EDF and the UK Government are now joining forces with the hopes of securing outside investors to help keep the project alive.
Hinkley Point C is a core part of the UK’s nuclear strategy and is supposed to provide 3.2 GW of secure, low carbon electricity for around 60 years, powering around 6 million homes and providing 25,000 job opportunities.
The first reactor has a target of coming online in June 2026 and is one of eight new reactors that are set to be built as part of the nuclear strategy that was unveiled in April.
It was announced as the country grappled with the impacts of global gas prices triggered by Russia’s war in Ukraine. The Government claimed more low carbon nuclear power, generated domestically, is needed in the UK’s energy mix to “ensure Britain’s future energy supply is bolstered” by the “reliable and affordable” energy source.
The ultimate goal is for nuclear power to deliver up to 24GW to the grid by 2050, representing up to around 25 percent of its projected electricity demand.
Hinkley Point C is one of the most important energy projects in the pipeline, but it is one of several key nuclear projects the Government is hoping to roll out to slash its reliance on foreign energy imports.
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EDF tweeted: “The station Sizewell C will use the same nuclear technology as Hinkley Point C, which is already halfway through construction.
“Together, the two stations will produce enough reliable, low-carbon power for 12 million UK homes, bolster our energy security and help Britain achieve Net Zero.”
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