European Commission OKs Hinkley Point Nuclear Deal

On Oct. 8, the European Commission (EC) decided that the state aid included in the Hinkley Point C nuclear plant construction proposal is compatible with European Union state aid rules.

The approval allows key elements of the agreement between EDF Group and the UK government, including a guaranteed “strike price” of £92.50/MWh ($148.76/MWh) for power produced by the plant, to remain essentially unchanged from last October’s negotiation. The strike price is indexed for inflation in the 35-year contract, but it would be reduced by £3.00/MWh if construction of the planned Sizewell plant also goes ahead.

The EC says its decision was the result of a 10-month, in-depth investigation.

“Since the opening of the investigation, we have carried out a very wide consultation of interested parties; we have analyzed in detail the issues raised; and we have held negotiations with the UK authorities,” Joaquin Almunia, vice president of the commission responsible for competition policy, said.

The EC enforces state aid rules to ensure that public support measures do not endanger competition in the market. It says UK authorities demonstrated that market forces alone could not achieve the construction of the nuclear power station due to its unprecedented nature and scale. EDF says the total cost for the plant (in 2012 currency values) is expected to be £16 billion ($25.7 billion) and construction will last almost 10 years.

Some support measures were modified by the UK following discussions with the EC. The remuneration fee was increased to more accurately reflect the risk of the project, and safeguards were added to share any project profits, if they are higher than currently expected. Gain-share mechanisms will be triggered if construction cost is lower than expected or return on equity is higher than estimated.

EDF Energy Chief Executive Vincent de Rivaz said: “The approval of the European Commission demonstrates that the proposed package of agreements between the Government and EDF is fair and balanced for investors and consumers now and for the long term.”

According to EDF, the next steps require the conclusion of agreements with strategic and financial partners. In parallel, the EC and the secretary of state, as part of the Funded Decommissioning Programme, must approve the waste transfer contract arrangements.

EDF and its partners must also finalize agreements to reach a final investment decision, but that has not stopped pre-development work from moving forward. Haul roads for site access, road improvements on the approach to the site, and the first stages of office buildings, worker accommodation, and welfare facilities have all seen progress since March.

Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)

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