(Bloomberg) -- Britain and Hitachi Ltd. are thrashing out a deal for two new U.K. nuclear plants akin to how a controversial agreement was struck with Electricite de France SA to build the nation’s first new reactor since 1995.
At a meeting with Prime Minister Theresa May last week, the government assured Hitachi that it will guarantee all loans for construction of the project in Wales, according to a report in Japan’s Mainichi newspaper, which the U.K. government said it didn’t recognize. Tokyo-based Hitachi is also seeking a set price from the power generated by the reactors, a government official said.
“It’s almost impossible to finance new nuclear without some kind of state involvement,” said Robert Gross of Imperial College London and a co-director of the U.K. Energy Research Centre. But the lack of transparency from a private deal rather than holding an auction makes it “hard to see how the government will avoid criticism for the Hitachi deal,” he said.
The government has already come under fire for its nuclear negotiations. It agreed to pay EDF 30 billion pounds ($40.7 billion) over 35 years for the Hinkley Point C nuclear project by guaranteeing a power price that was more than double market rates. The National Audit Office, which scrutinizes government spending, said Hitachi should be paid less for the power from its project in order to get a better deal for consumers.
The U.K.’s Department for Business, Energy and Industrial Strategy said that nuclear power is a crucial part of the nation’s energy future, but at the right price for consumers and taxpayers. It declined to comment on discussions with specific developers.
Hitachi spokeswoman Yuko Taniuchi declined to comment on the meeting between May and Hitachi Chairman Hiroaki Nakanishi in London on May 3.
The NAO has called the Hinkley deal “high cost and risky” and that the government failed to maximize chances to achieve value for money. Another criticism was the transaction was negotiated bilaterally rather than through a competition between other developers.
One financing option for the Wales plant, known as Wylfa Newydd, would be for the government to take a direct stake and finance it through the public purse rather than from consumers’ bills, according to Gross. The U.K. could then sell its share later.
Nuclear provides about a fifth of the U.K.’s electricity, but almost all of its 15 reactors will be retired by 2030. The government wants to encourage the construction of replacement power plants and there are plans to build as much as 19 gigawatts of nuclear capacity with the first new reactors expected to be operational in the mid-2020s.
“If Britain is serious about its ambitions to further reduce emissions, then it needs to bite the bullet and keep subsidizing nuclear,” said Elchin Mammadov, an analyst at Bloomberg Intelligence. “It will be a controversial yet a necessary move in order for Britain to meet its climate goals.”
Since the Fukushima disaster in 2011, public confidence in nuclear in Japan has collapsed. With no new nuclear projects to develop at home, Hitachi have the motivation to make the U.K. project work and to showcase their nuclear technology.
Hitachi is trying to sell a stake in its U.K. unit, Horizon Nuclear Power Ltd., to reduce the financial risk associated with building two new plants. Both its Wylfa Newydd project and a second in Oldbury, near Bristol in southwest England, have a planned 2.7-gigawatt capacity.
Hitachi said if given the go-ahead construction would also start next year with the plant beginning operation in the early 2020s.
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