Financing HInkley Point

TEAGS is pleased to co-release a report with its author, Professor Stephen Thomas, on financing of Hinkley Point. Read our press release below and view or download the full report here.

Report exposes EDF’s funding crisis and raises profound questions about how – and whether – Hinkley Point will be finished

EDF totally reliant on ‘nuclear tax’ to build Sizewell C

A report released today by Professor Stephen Thomas, [1] an academic specialising in the economics and policy of nuclear power, exposes EDF’s parlous finances and highlights the company’s absolute dependency on a hoped-for ‘nuclear tax’ in order to build Sizewell C. Suffolk campaigners TEAGS, who commissioned the report, said the report starkly showed just how impossible it would be for EDF to pay for Sizewell C, meaning that electricity consumers could be asked to pay billions extra on their bills long before any power is generated, for the privilege of EDF permanently destroying some of the country’s most biodiverse natural heritage.

The report “Financing the Hinkley Point C project” documents how – with more than £15bn in loan guarantees offered by the UK government now definitively known to have been cancelled by EDF, [2] their share of Hinkley’s costs has doubled, from an expected £6.3bn in 2013 to at least £14bn. It also reveals that EDF’s profitability has decreased, its expenses in France – especially Flamanville and work to extend the lives of ageing reactors – have increased, and a ‘fire sale’ of assets only raised half of the company’s €14bn target, circumstances that combine to make the completion of Hinkley Point based on its own resources, rather than borrowing, highly doubtful.

Outlining EDF’s financial challenges in the report’s Executive Summary, Professor Thomas says: “A funding crisis has put the completion of the Hinkley Point C nuclear power plant in doubt and has been brewing for at least five years. However, it is only part of the financial collapse that the majority owner, EDF is facing. Borrowing without guarantees is impossible, so completing Hinkley will need an open-ended commitment of British and French public money. The sensible course is to abandon the plant now before more public money is wasted.” 

Professor Thomas’ findings illustrate just how totally reliant EDF is on the possibility of a new funding scheme to finance Sizewell C. The proposed Regulated Asset Base (RAB) approach, which the nuclear industry is pressuring British Ministers to adopt, would essentially be a ‘nuclear tax’, similar to the discredited PPP (Public Private Partnerships) of the 1990s. “It would be giving EDF a ‘blank cheque’ to proceed with Sizewell C, with the inevitable cost overruns loaded onto taxpayers and electricity customers,” says Alison Downes of TEAGS, who commissioned the report.

Government has yet to reveal the results of the consultation on RAB – a ‘tax’ that 36,000 supporters of consumer campaign group SumOfUs oppose. [3] In December, Sizewell C Project lead at the time, Jim Crawford, admitted to a Suffolk Community Forum thatif the RAB model or something similar is proposed which will fall outside an acceptable price range for the government, then the project probably won’t go ahead. It’s as simple as that.” [4] 

Alison Downes adds: “What this report reveals is the shaky nature of EDF’s finances and its total dependence on the RAB for Sizewell C. Surely this information, coupled with EDF’s appalling record of cost overruns and delays at all its EPR projects, should shatter any illusions that Sizewell C could offer value for money through the timely delivery of the project at an acceptable and predictable cost.  

Notes

1. Professor Steve Thomas is Emeritus Professor of Energy Policy at the University of Greenwich’s Public Services International Research Unit; https://www.gre.ac.uk/people/rep/faculty-of-business/steve-thomas

2. There was some ambiguity in EDF’s previous statements about the loan guarantees. In October 2015 EDF said ‘The project is due to be equity funded by each partner, at least during a first stage.’ (our emphasis) https://www.edfenergy.com/energy/nuclear-new-build-projects/hinkley-point-c/news-views/agreements-in-place. The information that EDF had completely cancelled the guarantee was confirmed in email exchanges between BEIS and TEAGS in December 2019. Conditions attached to the guarantee had included the operation of Flamanville by the end of 2020, a target EDF will miss by some distance. 

3. https://actions.sumofus.org/a/no-energy-bill-surcharge-for-new-nuclear

4. Contemporaneous notes, 16 December 2019, reported in The Times https://www.thetimes.co.uk/article/edf-seeks-funding-to-save-sizewell-c-nuclear-plant-x5g5sfllg

Featured image of Hinkley Point construction site by Alex Reed.