Hinkley Point C nuclear deal agreed

The French utility also confirmed it had secured equity investments from two Chinese nuclear firms.

EDF and the Department of Energy and Climate Change (DECC) confirmed that they have agreed an initial “strike price” of £92.50 per MWh, very close to the £93/MWh predicted two weeks ago.

This strike price, which will run for 35 years, will ensure EDF receives a top-up payment from government should the wholesale electricity price fall below it, and pay money back to government when the price rises above it. Wholesale electricity is currently trading at £46/MWh.

The strike price for Hinkley Point C may be lowered to £89.50/MWh if EDF also builds its planned Sizewell C nuclear plant, with Sizewell C paying Hinkley the additional £3/MWh.

This deal is competitive with other large-scale clean energy and with gas

Energy secretary Ed Davey

In addition to agreeing the strike price, DECC and EDF also confirmed that HM Treasury will guarantee any bank debt used to finance the construction of Hinkley Point C, up to 65% of the £14 billion capital costs – potentially more than £9 billion.

For its part, EDF will have to pay into a Funded Decommissioning Programme to cover the costs of clean-up when the plant comes to the end of its operating life.

“This deal is competitive with other large-scale clean energy and with gas,” said Energy and Climate Change secretary Ed Davey.

“We are creating one of the most attractive electricity investment markets in the world – and this is a clear sign that investors are already responding, even before our electricity market reforms become law.”

EDF also announced this morning that it had entered into an agreement with China General Nuclear Corporation (CGN) and China National Nuclear Corporation (CNNC) where the two firms would take equity stakes in Hinkley Point C amounting  to a 30-40% share of plant ownership.

The plants other owners will be EDF with 45-50% equity, Areva with 10%, and discussions are also taking place with a shortlist of other interested parties who could take up to 15%.

“The agreement in principle reached today with the British government offers industrial players a clear and long-term framework that will encourage investment,” said EDF CEO Henri Proglio.

“I am also delighted that other major world nuclear industry players have decided to join us in this large-scale project. Areva, our historical partner, along with CGN and CNNC, with whom we have been working for 30 years, will contribute their expertise alongside EDF, working towards the success of the Hinkley Point project.”

Hinkley Point represents a great opportunity for the French nuclear industry

EDF CEO Henri Proglio

Hinkley Point C will be built on a 176ha site in Somerset adjacent to the existing Hinkley Point A and B nuclear plants. The project will comprise chiefly of two Areva 1,630MW European Pressurised Reactors (EPR), two turbine halls, cooling water infrastructure, and waste and fuel facilities including storage. It will have a total generating capacity of 3.26GW.

EDF is set to make a final investment decision on the project in July 2014, and construction is expected to start in 2015. The first of the reactors is expected to come online in 2023.

Proglio added: “The EPR project at Hinkley Point represents a great opportunity for the French nuclear industry in a context of a renewal of competencies. This project will deliver a boost to the economy and create job opportunities on both sides of the channel and will enable the United Kingdom, a country in which EDF is already the leading producer of electricity, to increase the share of carbon-free energy in its production mix.”?

Contracts already awarded for the construction of the project include a joint venture of Bouygues and Laing O’Rourke for the main civil engineering package, Costain for marine work, Alstom for the turbines and Areva for instrumentation and control, nuclear steam supply system and fuel. Some early earthworks preparing the site have already taken place.