By Sharryn Dotson, associate editor
A colleague and I were talking about the fate of the 3.2-GW Hinkley Point C project in the United Kingdom. She said she was not ready to make a final decision about whether the project would ever proceed, though she did admit that it’s not looking too promising. I was very forthcoming with my opinion: I don’t think it’s going to happen. UK government officials say Hinkley Point C is needed to replace aging nuclear plants and coal plants set to retire by 2025, but I don’t think this project will be the answer. The utility is also investing in nuclear projects at Sizewell and Bradwell in the UK.
Before you say I’m a pessimist or anti-nuclear or have little faith in the industry, just let me explain. I am forming my opinion on the current circumstances surrounding the project that would use two Areva-designed European Pressurized Reactors (EPRs). The U.S. obviously isn’t the only country dealing with issues surrounding new nuclear power projects, and the UK has some doozies it is trying to overcome to get the plant up and running.
Here’s what we know:
- The project as it stands will cost more than the value of the company that is building it. The two EPRs are expected to cost 23.3 billion euros ($25.6 billion). EDF’s market value, as of mid-March 2016, is at 22.8 billion euros ($25.2 billion). Journalists are notoriously bad at math, but even I can tell you that doesn’t add up.
- Areva is also financially unstable and not only has been bailed out by the French government, which also owns EDF, but EDF bought Areva’s nuclear reactor firm.
- EPRs currently under construction in France and Finland are behind schedule and over budget. This is the technology EDF wants to use to build two new units at Hinkley Point C. Granted, there is nothing wrong with the technology, just the construction process.
- EDF is having trouble securing investors for Hinkley Point. CGN has only bought a one-third stake in the project, leaving EDF to foot the bill for the rest unless they can bring in other funding. EDF keeps putting off finalization of funding, now saying the will have an announcement “in the near future.”
- UK’s former energy secretary Ed Davey says the project actually would have cost more if he wasn’t involved in talks, but the public is not happy about paying double the electricity prices when the plant is operational.
- According to Bloomberg, the Cour des Comptes, considered the French equivalent of the UK’s National Audit Office, said the project and the financing is potentially risky for EDF, given the company’s cash flow and debt limit its capacity to invest abroad.
The French government says it will finalize funding for the project in May, so maybe things will work out in the end. The EU’s anti-trust regulators approved the financing plan with CGN in mid-March, so there are apparently still some who believe in the project. Frankly, I’m just not one of them. But, maybe things will work out in the end and I will have to eat crow. I’m okay with being proven wrong (sometimes). But, there are too many things working against Hinkley Point C than working for it. From the beginning, there was not much faith that the project would receive the hotly contested incentives from the European Commission. There was a huge uproar against the UK government’s agreement to buy the output of the project at twice the current wholesale price for 35 years. Questions about the project’s survivability have abound almost since it was first announced.
Everyone in the industry knows it takes lots of time and money to build a nuclear power plant. The start of operations for Hinkley Point C has been pushed back to 2025, but construction won’t begin until financing is finalized. So, again, the project hinges on if more investors can be brought in. Looking at all the press surrounding the project, I wouldn’t want to put any of my money into it.