Costs Rise Again for U.K. Hinkley Point Nuclear Project

(Bloomberg) -- Electricite de France SA raised the estimated cost of two reactors it’s building in the U.K., making Britain’s nuclear ambitions look increasingly untenable as renewables become ever cheaper to develop.

EDF said the bill for the Hinkley Point C reactors could rise by as much as 2.9 billion pounds ($3.6 billion), and warned of a delay to their completion. The French utility -- not British consumers -- will swallow that extra cost, but the increase raises questions about whether other nuclear power plants planned in the country will be affordable.

The giant atomic project is expensive compared with U.K. wind, for example, where power from the latest offshore auction sold at less than half that from Hinkley.

The U.K. government has put nuclear at the heart of its effort to attract billions of pounds of investment in new power plants as aging reactors are retired in the coming years. The technology has been seen as a key part of a cleaner electricity mix, complementing the rising share of renewables. Yet delays and cost overruns at Hinkley -- echoing EDF’s troubles at a similar plant in France -- will cast doubt on a nuclear renaissance already facing criticism.

The project completion cost at Hinkley Point C is now estimated at 21.5 billion to 22.5 billion pounds, EDF said Wednesday, citing “challenging ground conditions” among other extra expenses. The additional costs will be borne by EDF and its Chinese partner China General Nuclear Power Corp., though they’re still set to receive 92.50 pounds for every megawatt-hour of power Hinkley generates -- more than double the current market price.

The two Hinkley units will be the country’s first new reactors in decades, but have faced heavy opposition for their high cost to consumers. Other U.K. nuclear projects have also struggled to compete with the falling cost of wind and solar farms. Hitachi Ltd. in January scrapped its Wylfa venture in Wales despite a generous package of support from the government.

EDF’s shares tumbled as much as 7.4%, the most in two weeks. The stock traded down 6% at 10.06 euros as of 3:28 p.m. in Paris, valuing the company at 30.7 billion euros ($33.7 billion).

“The cost overruns are material versus the EDF market cap,” RBC analysts said in a note. “This is likely to further boost support for renewables -- and especially scaleable offshore wind -- as the main decarbonization solution for electricity generation.”

The Hinkley plant’s guaranteed power price is significantly higher than the 39.65-pound fee agreed in the latest round of offshore wind projects. Nevertheless, EDF on Wednesday cut its estimated rate of return from the plant to as little as 7.6% from 8.5% seen two years ago.

The announcement also adds to EDF’s woes at home, where its Flamanville reactor -- using the same design as Hinkley -- is years behind schedule and way over budget. French President Emmanuel Macron has asked EDF to prove that it can build new nuclear power stations at lower cost amid falling renewable-energy prices.

The U.K. government approved EDF’s plan to build the two Hinkley reactors for 18 billion pounds in 2016, and the cost was raised to 19.6 billion pounds the following year.

The company said Wednesday it still hopes to begin generating power from the first unit at the end of 2025, though the risk of a 15-month delay for that reactor -- and a nine-month delay for the second -- has increased. If that risk were to materialize, it would entail an additional cost of about 700 million pounds, it said.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan

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