EDF Energy Hinkley Point C Press Conference (Low resolution)
- EDF Group and UK Government agree on key commercial terms of investment contract for HPC
- Project will benefit from the Government's Infrastructure Guarantee Scheme under terms and conditions to be agreed upon
- EDF Group announces new partners and confirms key suppliers
- Final investment decision conditional on completion of remaining key steps
EDF Group and the UK Government have reached in principle an agreement on the key commercial terms for an investment contract of the planned Hinkley Point C nuclear power station. This major step is one of a comprehensive set of agreements for the project which can be announced today.
The balanced investment contract will give investors the confidence to invest in a new nuclear power station which is capable of providing the UK with secure, reliable, low carbon electricity at a fair price for consumers. It shows that new nuclear will be able to save customers money compared to other forms of generation, as well as creating thousands of jobs and strengthening long term industrial capability.
The agreements are :
- The key commercial terms of an investment contract for Hinkley Point C
- Confirmation that the project will benefit from the Government’s Infrastructure Guarantee under terms and conditions to be agreed upon
- Letters of Intent with equity partners
- The four main contracts for engineering and construction
- Broad terms for a Funded Decommissioning Programme for Hinkley Point C[i]
Finalisation of these agreements and construction of the plant are subject to a final investment decision. The Government and EDF Group will work together to address the remaining steps which must be taken before that decision can be taken.
The agreement is fair and balanced for consumers and investors. It means Hinkley Point C will offer stable and predictable prices through a “Contract for Difference”. If wholesale prices rise above an agreed “strike price”, consumers will not pay extra. If they fall below this price the generator will receive a top-up payment. Customers pay nothing until the power station is operational.
Agreement followed a robust and thorough process including opening the project to independent validation on behalf of the Government.
EDF Group has plans for two EPR reactors at Hinkley Point C in Somerset. In addition it is also developing proposals for two EPR reactors at Sizewell C in Suffolk. Successive power stations built to the same design have `a “series benefit” from a shared design, supply chain and engineering work.
The Strike Price is set at:
- £89.50/MWh if Sizewell C goes ahead. There will be a payment from Sizewell C to Hinkley Point C equivalent to £3/MWh upon the final investment decision being taken with respect to Sizewell C reflecting the fact that the first of a kind costs of EPR reactors are shared across the Hinkley Point C and Sizewell C sites.
- £92.50/MWh for HPC project if Sizewell C does not go ahead.
The payment mechanism funded by the Sizewell C project is intended to ensure that there is no impact on Hinkley Point C economics if Sizewell C goes ahead.
In addition, if savings are achieved in the construction of the Hinkley Point C project, these will be shared with consumers through a lower strike price.
DECC forecasts that electricity from Hinkley Point C will be competitive with future gas generation prices as well as all low carbon energy sources. It is estimated that the UK new nuclear programme will save households £74 a year in today’s prices by 2026-30.
Other key points of the investment contract agreed in principle include: - EDF Group and its partners will take the risk of constructing the power station to budget and schedule
- The strike price will be fully indexed to inflation through the Consumer Price Index
- The contract will last for 35 years from the date of commissioning
- A rate of return (IRR[i]) of around 10% by the project in line with EDF Group investments criteria
- The project will be protected from unforeseen changes of law[ii]
Agreement in principle on the scope of the UK Guarantees scheme and on the key terms of the investment Contract allows EDF Group to move ahead to secure partners for the financing of the project. The share of equity is expected to be:
China General Nuclear Corporation (CGN) }
China National Nuclear Corporation (CNNC) }
Discussions are also taking place with a shortlist of other interested parties who could take up to 15%
AREVA has been integral in the construction of all the existing EPR projects and will bring the expertise and lessons learned from these projects to be applied in the UK.
The EDF Group has been working as an industrial partner with CGN and CNNC for 30 years. This includes the joint venture between EDF Group and CGN to build two EPR reactors at Taishan. The UK will benefit from this long-standing co-operation and the extensive and proven capability of CGN and CNNC in the construction and operation of nuclear plants.
The UK’s nuclear regulation ensures that all builders and operators must demonstrate that they operate in the interests of the UK and meet strict compliance requirements for safety and security.
The partnership will give CGN and CNNC the opportunity to gain experience in the UK and will support their long term objective of becoming nuclear developers in the UK in partnership with EDF Group and in full compliance with UK regulatory requirements.
The risk of constructing the power station to budget and schedule will be shared by EDF Group and its partners.
The Prime Minister David Cameron said: “Earlier this month I spoke about our new industrial policy that looks to the future, and about our determination to embrace new technologies and back new industries and energy sources so that they can flourish and help us build a rebalanced economy across the country. As part of our plan to help Britain succeed, after months of negotiation, today we have a deal for the first nuclear power station in a generation to be built in Britain. This deal means £16bn of investment coming into the country and the creation of 25,000 jobs, which is brilliant news for the South West and for the country as a whole. As we compete in the tough global race, this underlines the confidence there is in Britain and makes clear that we are very much open for business.
“This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply".
Secretary of State for Energy and Climate Change Edward Davey said: “This is an excellent deal for Britain and British consumers. For the first time, a nuclear power station in this country will not have been built with money from the British taxpayer. It will increase energy security and resilience from a safe, reliable, home-grown source of electricity. This deal is competitive with other large-scale clean energy and with gas – and while consumers won’t pay anything up front, they’ll share directly in any gains made from the project coming in under budget and from refinancing or equity sales.”
EDF Group Chairman and CEO Henri Proglio said: “The agreement in principle reached today with the British government significantly strengthens the industrial and energy co-operation between France and the United Kingdom. The EPR project at Hinkley Point represents a great opportunity for the French nuclear industry in a context of a renewal of competencies.This project will deliver a boost to the economy and create job opportunities on both sides of the channel and will enable the United Kingdom, a country in which EDF is already the leading producer of electricity, to increase the share of carbon-free energy in its production mix.”
EDF Energy CEO Vincent de Rivaz said: “What we are announcing today is a good, fair and balanced deal for consumers, the UK and EDF. The project will kick start the UK nuclear programme and will help rebuild the nation’s industrial stamina. The progress so far on the project reflects the great skill and determination of a world class team which is ready to get to work and turn Hinkley Point C into a reality. ”
Preliminary works for the project are already well advanced, with a design approved by UK regulators, a nuclear site licence in place and planning permission has been given for construction. Costs have been established through competitive tendering process and have been independently scrutinised.
Subject to a final investment decision by July 2014, the power station is expected to complete commissioning of the first unit in 2023. This means the power will be delivered when it is needed, at a time when the existing fleet of AGR reactors will be coming towards the end of operation, allowing a transition from one generation of nuclear power to the next.
The construction cost of the two nuclear power units at Hinkley Point, expressed in 2012 money, is expected to be £14bn. In addition to the construction costs, the project and its partners will have incurred £2bn of other costs before first operation. These include land purchases, achieving the different consents, construction of a spent fuel storage facility and preparing the 900 strong team which will run the station. This means that the total costs to first operation are expected to be close to £16bn, expressed in 2012 money.
For the first time in the UK, costs of waste and decommissioning are built into the project upfront through a Funded Decommissioning Programme.
Key terms of the contracts for the four most important suppliers to the project have now been finalised subject to a final investment decision. These are with:
- Bouygues TP/Laing O’Rourke (civil work contract)
- Costain (marine work)
- Alstom (turbines)
- Areva (Instrumentation and Control, Nuclear Steam Supply System and Fuel)
Work with potential suppliers, as well as national and local supply chain events have promoted opportunities for UK and Somerset businesses to supply the project. This means that 57% of the project’s construction value could be spent in the UK, building skills and expertise which will help the country win a greater share of nuclear programmes nationally and globally.
New alliances between British and French industry will allow both to take a leading role in this project and nuclear projects around the world.
Hinkley Point C has the potential to create 25,000 job opportunities in the UK during its construction, including 400 apprentices. It will create 900 jobs when operational.
Investment in local colleges, an enterprise centre and construction skills centre help people from Somerset to benefit from the project.
Building the new power station will also kick start the UK’s new nuclear programme and lead to lower costs for successive power stations.
The Government has confirmed that the project is eligible for its UK Guarantees scheme. It is currently assumed that, subject to Infrastructure UK due diligence, Treasury-guaranteed debt will finance 65% of expected total costs prior to operations, backed by an appropriate security package provided by the investors.
Infrastructure UK is undertaking a comprehensive due diligence of the project in order to verify the scope and determine the terms and conditions of a guarantee.
A final investment decision for all partners requires a number of further conditions to be met. These are:
- Agreement of the full investment contract
- EDF Group to finalise agreements with industrial partners for equity funding and with Infrastructure UK for debt funding
- A decision from the European Commission on state aid
[i] For the first time in the UK, a Funded Decommissioning Programme means that EDF Group will pay at the time of generation for the eventual decommissioning and waste management costs associated with Hinkley Point C. This cost is included in the strike price.
[ii] Internal Rate of Return of a project is a standard measure of profitability used by investors
[iii]NNB GenCo will be protected against discriminatory or specific changes in law for example (i) change in law that is applicable only to HPC, or only to NNB, or only to generation facilities with CfDs, or only to nuclear generation facilities, or only to nuclear generation facilities with CfDs; (ii) change in law which has an undue and not objectively justifiable, discriminatory effect on HPC in comparison with a comparator group of generators; and (iii) a tax on uranium, provided in each case that such changes do not constitute (A) a 'foreseeable' change in law, (B) a change in policy or (C) development of good practice in the on-going civil generation nuclear industry.
Structure of the partnership for Hinkley Point C project
EDF Group today announced a comprehensive set of agreements in principle for the proposed nuclear power station at Hinkley Point C. This additional news release contains further details of agreements with new partners for the project.
Preliminary works for the Hinkley Point C project are well advanced and an agreement has been reached in principle on an investment contract for the planned station. It has an approved EPR reactor design, regulators have awarded relevant nuclear site licences, labour relations agreements are in place and the UK Government has granted permission for construction.
Finalising agreements with industrial partners for equity funding is one of the remaining key steps necessary before a final investment decision can be taken.
Letters of Intent have now been signed by EDF Group, AREVA, CGN (China General Nuclear Power Corporation)and CNNC (China National Nuclear Corporation) to become strategic and industrial partners in the project.
AREVA, which is the worldwide leader of the nuclear supply industry, is a long-standing partner of the EDF Group. In the UK, AREVA has developed a growing presence in nuclear fuel, services and backend expertise. Jointly with the EDF Group, AREVA has pursued the Generic Design Assessment (GDA) of its EPR technology, making it the only generation III design certified in the UK.
EDF Group and AREVA have been working with CGN for 30 years since the construction and operation of the Dayabay Nuclear Power Plant to international standards. In addition, AREVA has developed fruitful industrial relationships with CNNC, both in the reactor and fuel cycle businesses. The new partnership for Hinkley Point C will bring a range of benefits to the project, the UK, France and China.
EDF Group has world-class expertise in the operation and construction of nuclear power stations. Through EDF Energy which operates 15 reactors, it is the leader in nuclear power in the UK. Improvements in safety, operational performance and high levels of investment in its eight power stations have demonstrated that EDF Energy is a trustworthy and responsible operator in the UK.
Both Chinese partners have extensive and wide-ranging capabilities in the development and construction of nuclear power stations. CGN is currently the world’s largest developer and constructor of new nuclear power plants. It has eight units in operation and has 15 under construction, including two EPR reactors being built in a joint venture with EDF at Taishan. CNNC has nine units in operation and 12 under construction
EDF Group will be the “responsible designer” for the project with a central role in the design and engineering of the power station at Hinkley Point C.
The partnership will give CGN and CNNC the opportunity to gain experience in the UK and will support their long term objective of becoming leading nuclear developers in the UK in partnership with EDF Group and in full compliance with UK regulatory requirements.
The share of equity is expected to be:
- EDF Group 45-50%
- AREVA 10%
- China General Nuclear Corporation (CGN) }
- China National Nuclear Corporation (CNNC) } 30 - 40%
- Discussions are taking place with a shortlist of other interested parties who could take up to 15%
The UK’s strong nuclear regulation regime ensures that all builders and operators must demonstrate that they meet strict compliance requirements for safety and security.
A number of suitably qualified Chinese personnel will join the project to work alongside members of the project team, subject to the usual approvals from the UK regulators.
The risk of constructing the power station to budget and schedule will be shared by EDF Group and its partners.
Luc Oursel, CEO of AREVA said: “The Hinkley Point project is a priority for AREVA and for the whole French nuclear industry, and the group is engaged to ensure its success. Today’s agreement represents the fruit of a joint endeavour with EDF since 2007 to contribute to the renewal of nuclear energy in the United Kingdom. This 5th and 6th EPR projects will benefit from the experience gained from the EPR reactors under construction in Finland, France and China”.
He Yu, Chairman of China Guangdong Nuclear Power Holding Co. (CGN), said: “CGN is interested in the UK electricity market and will play a key role in the HPC project. CGN would contribute to the project by bringing its experience and expertise, particularly acquired from the CGN controlled Taishan EPR project to HPC. CGN has a long term target and objective in the UK nuclear new build program and it is appreciated that both EDF and the UK government have expressed their undersdanding of this and agree to give support accordingly.”
Sun Qin, Chairman of (China National Nuclear Corporation) CNNC said: “CNNC is glad to see that UK government and EDF Group have reached an agreement on the key items of the HPC project. We think that the HPC project has a great significance in both UK energy market and world nuclear power development, and we are proud to participate in it. With experience of all aspects of the nuclear industry and 30 years of building nuclear power plants, CNNC will participate in the UK nuclear new build program with the support of EDF and UK government.”
EDF CEO Henri Proglio said: “The agreement in principle reached today with the British government offers industrial players a clear and long-term framework that will encourage investment. I am also delighted that other major world nuclear industry players have decided to join us in this large-scale project. Areva, our historical partner, along with CGN and CNNC, with whom we have been working for 30 years, will contribute their expertise alongside EDF, working towards the success of the Hinkley Point project.”
New alliances between British and French industry will allow both to take a leading role in this project and nuclear projects around the world. The project will draw on the global nuclear supply chain, providing opportunities for countries including China.
Notes To Editors
EDF in Paris :
Carole Trivi & Aurélien Cassuto : +33 (1) 40 42 46 37
EDF Energy in London :
Sue Fletcher: firstname.lastname@example.org / 07736727964
Nick Foley: email@example.com / 020 7752 2196, 07875110674
Louis Blake : firstname.lastname@example.org / 020 7752 2248, 07875114307
AREVA in Paris
Julien Duperray & Katherine Berezowskyj: +33 (1) 34 96 12 15
Analysts and Investors
EDF in Paris :
Carine de Boissezon & Kader Hidra : +33 (1) 40 42 45 53
David Newhouse (investisseurs US) : + 33 (1) 40 42 32 45
EDF Energy is one of the UK’s largest energy companies and the largest producer of low-carbon electricity, producing around one-fifth of the nation's electricity from its nuclear power stations, wind farms, coal and gas power stations and combined heat and power plants. The company supplies gas and electricity to 6 million business and residential customer accounts and is the biggest supplier of electricity by volume in Great Britain.
EDF Energy’s safe and secure operation of its eight existing nuclear power stations at sites across the country makes it the UK’s largest generator of low carbon electricity. EDF Energy is also leading the UK's nuclear renaissance and has published plans to build four new nuclear plants, subject to the right investment framework.
These new plants could generate enough low carbon electricity for about 40% of Britain’s homes. They would make an important contribution to the UK’s future needs for clean, secure and affordable energy. The project is already creating business and job opportunities for British companies and workers.
Through Our Better Energy Ambitions, EDF Energy has developed one of the biggest environmental and social programmes of any British energy company.
In 2014 EDF Energy received seven ‘Big Ticks’ in the Business in the Community (BITC) Responsible Business Awards. In 2013 EDF Energy received the Environmental Leadership for Behavioural Change Award in the national Environment and Energy Awards and was highly commended in the first ever pan European Corporate Social Responsibility Awards scheme for its Sustainable Schools programme – the Pod.
EDF Energy is part of EDF Group, one of Europe’s largest power companies. The company employs around 15,000 people at locations across the UK.
To find out more about the UK's energy challenges look at www.edfenergy.com/energyfuture/