U.K. Moves Toward Involvement on $27 Billion Nuclear Plant
(Bloomberg) -- The U.K. is considering whether to take an equity stake in a 20 billion-pound ($27 billion) nuclear project in Wales, a move that would mark a major step away from private control of energy markets.
Greg Clark, the Cabinet minister in charge of business and energy, confirmed the government has entered detailed negotiations with the developer Hitachi Ltd. and Japan about how to fund the project in Wylfa and that deeper involvement by the state is one of the options. No decision has been made, and the discussions may last months and require numerous regulatory approvals.
Prime Minister Theresa May’s administration is under pressure to reduce the cost of building a new nuclear plant after awarding Electricite de France SA a deal that at the time paid double the market power price for nuclear energy for decades. By helping Hitachi shoulder construction risks before the plant starts producing, the government could reduce the final cost of the plant to taxpayers.
“The government will be considering direct investment alongside Hitachi and the Japanese government agencies as well as other parties,” Clark told Parliament in London on Monday.
For Britain, a move toward public involvement in the project would reverse some of the work to privatize the energy industry started decades ago by Margaret Thatcher. The French government and CGN are involved in the Hinkley project, but the U.K. was careful to stay out of that project after years of effort to reduce public involvement in energy.
In recent years, the U.K. got more deeply involved in the energy market by offering contracts for difference that guarantee major power plant operators a certain price for their power, ensuring that market fluctuations won’t leave many plants unprofitable. It has to date avoided taking a direct stake in the industry.
The remarks are the first official word confirming what a junior minister in the department outlined last week about how the talks might progress. There are several funding options still being discussed, including a direct equity stake in the project, a sovereign guarantee on loans and a partnership between the U.K. and Japanese governments, Richard Harrington, the under secretary of state for business and industry said in an interview.
Hitachi said in a statement it welcomes Clark’s comments on the project, and will continue to assess its economic feasibility ahead of a final investment decision.
At EDF’s Hinkley project in southwest England, it’s EDF that is paying for construction and all costs until electricity starts to flow from the plant. In the case of Hitachi, the government plans to take more of the risk, according to Harrington. Clark didn’t give details about how the deal in Wales might be structured.
The U.K. is keen to involve the private sector in any financing plan it agrees.
They’re still talking to China General Nuclear Power Corp., EDF and Toshiba Corp. about separate nuclear projects.
“We will now be entering into negotiations with Hitachi on the next phase of the Wylfa project,” Clark said in the statement. “Both the National Audit Office and Public Accounts Committee have recommended that the government consider variations from the Hinkley Point C financing model in order to reduce costs to consumers.”
“It remains the government’s objective in the longer-term that new nuclear projects – like other energy infrastructure – should be financed by the private sector,” the government said in the statement.
©2018 Bloomberg L.P.