Hinkley Investment Decision Delayed

EDF won’t be able to make an investment decision, with its equity partners on-board, before the next general election. This delay could put the project at risk. One of the major threats to large capital government sponsored projects, like nuclear power stations, is that elected officials change their minds. This could be one of those times.

France’s state-controlled EDF and the UK government are working hard to complete financial agreements on the planned Hinkley Point C nuclear station. The firm said it is making “significant progress” with the objective of making a final investment decision in the next few months.

EDF said it is also making progress in discussions with future investment partners in the project. In particular, progress is being made with Chinese partners on all aspects of their nuclear industrial co-operation in the UK. For their part, the Chinese nuclear firms are asking for loan guarantees from the French government and for a share of the procurement of components.

EDF is planning to build two Areva EPR reactors at Hinkley Point. UK media reported earlier this year that a final investment decision was due in March 2015. It appears now it has been pushed back, but to when is still uncertain.

EDF disclosed this week that the project, which will cost {L}24.5 billion, is “months away” from a final investment decision. That timetable could put it past the general election in the UK in May. A change in the government might change the outlook for the project.

The Financial Times reported last November that the UK Labor Party has called for the proposed nuclear power station at Hinkley Point to be referred to the Whitehall auditor to examine whether the £24.5bn project will offer the best possible deal for taxpayers.

According to the newspaper, Tom Greatrex, shadow energy minister, said the National Audit Office should scrutinize a 35-year subsidy deal to ensure that it represents value for money.

In a conference call with investors and financial analysts last week, new EDF CEO Jean-Bernard Levy said the firm is in the final stages of negotiations particularly on the issue of the price power will be sold to customers. Levy said the investment decision depends on this number being in place.

The two Chinese investors in the plant are also contending between each other over which one will supply which components to the project. China General Nuclear (CGN) and China National Nuclear Corp. (CNNC) are said to be working out their differences and also their respective shares of the equity investment pool.

Both firms are also proposing to be equity investors at the Sizewell project, but are pushing supplying their new Hualong One reactor design as a price of the equity cash. That demand is a non-starter with EDF which is already partnered with French state owned nuclear giant Areva to supply two 16509 MW EPRs to the Sizewell power station. EDF and Areva, after years of bureaucratic competition, have mostly settled their differences and are working together on projects like Hinkley and Sizewell.

The Chinese firms may understand this, but it hasn’t stopped them from hawking their new export design. They also understand that while EDF and Areva are coordinating some of their business efforts, the cooperation doesn’t extend to filling the (euro) 2 billion capital shortfall faced by Areva.

The firm is expected to release a new financial strategy in early March. One aspect of it may include a request for a government bailout, but the mechanism remains to be seen. Areva is also facing write downs based on delays and cost overruns for two reactors under construction, one in Finland and the other in France.

Areva needs the new capital, unencumbered by other claims, to be a credible supplier to both the Hinkley and Sizewell projects. If it doesn’t get it, EDF may be faced with finding a replacement reactor vendor. While the politics of this might be unthinkable in France, the project is in the UK which trims EDFs’ options to be the sole decision maker.

Like Hinkley, investors in Sizewell want a power purchase agreement in place before placing their cash on the barrelhead.

UK PM Cameron slaps Austria for meddling in nuclear projects

It isn’t often that a spat between a pro-nuclear nation, and one that is determined to export its anti-nuclear paradigm to the rest of the world, comes into sharp focus. This week UK PM David Cameron told Austria’s UK Ambassador Martin Eictinger his nation needs to back off from a legal challenge to the UK’s 19 GWe new nuclear build.

In a formal letter Cameron wrote that the UK would respond to Austria’s efforts with action “that will have strong political impact.”

For its part, Austria is protesting to the European Union that the government’s price guarantee for power purchase agreements for the new nuclear plants amount to a “state subsidy,” something it wants banned for nuclear projects. Austria has no problems with state subsidies for solar and wind energy projects.

Cameron said he would launch an effort to determine whether Austria’s efforts violated several European Union energy agreements.

Austria said it plans to file a suit in the European Court of Justice later this year seeking to block the UK nuclear build on the grounds that it is non “economically sustainable” with the rate guarantee in place.

Austria may be biting off more than it can chew. With EDF and Areva betting the ranch on Hinkley, sooner or later the French government is going to have to weigh in on this dispute.  Then Austria will be up against not one but two highly irritated sovereign governments.

Swiss abandon nuclear safety push

The Swiss government, after pushing stringent and binding new nuclear reactor safety rules, has opted for support to a non-binding pledge tied to the Vienna Declaration on Nuclear Safety.

Diplomats from the 77 member countries unanimously adopted the change to the document.

Switzerland’s top nuclear safety official, Hans Warner, told the Bloomberg wire service he was unhappy with the outcome. He called the change “politically motivated.” In point of fact, the Swiss started the dispute by bringing forward what some, including the US and Russia, saw as a blatant anti-nuclear measure to the meeting.

The US and Russia became unlikely partners in opposing the motion because it imposed conditions on future reactor operations that both nation say were unneeded. US diplomats previously dismissed the Swiss move as being unrealistic since the US has already moved to upgrade the safety of its nuclear fleet in the post Fukushima era.

Eliot Kang, representing the US at the meeting, said US nuclear utilities have already spent millions of dollars implementing the new safety requirements.

Additional backup diesel generators are being installed at 70 sites. Each plant already has equipment in place to provide AC power in case of a loss of off-site power. After Fukushima Daiichi, more equipment, including portable diesel generators, portable pumps, and other equipment are being added. These additional measures are often referred to as the FLEX strategy.

Several member states point out that implementing the Swiss resolution would not make much progress since some nations would not tolerate interference in their domestic affairs by an international agency.  They also said that the lengthy process of taking an treaty resolution with the force of international law, to ratification among member states could take years.

Swiss government anti-nuclear stance not supported in polls

For its part Switzerland has plans to shut down and not replace its current fleet of nuclear power plants. The government’s plan is not widely supported as shown in a January 2014 poll indicating a majority supported the plants.

According to the poll, more than 60% of Swiss believe nuclear energy is needed as a source of electricity with three-quarters saying the country’s nuclear stations are safe.

A NucNet report shows that the poll – the latest in a series carried out annually since 2001 by market research company DemoScope on behalf of Swiss nuclear industry trade association Swissnuclear – questioned 2,200 people in October 2013.

The poll shows 64% of respondents said they considered Switzerland’s five existing reactors essential in meeting the country’s electricity demand. This is around the average level reported since the first poll in 2001, but marks a three percent increase from 2012.

There was support for the continued use of nuclear power, with 68% of respondents saying Switzerland’s existing reactors should remain in operation as long as they are safe. This compares with 62% of respondents in previous year.

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