UK Finance Minister Defends Hinkley Point C

The planned newbuild Hinkley Point C nuclear power plant is a "well-designed transfer of risk: one where the risk has never been transferred from the buyer to the seller before," UK finance minister Philip Hammond told the House of Lords Economic Affairs Committee Thursday.

Committee chairman Lord Hollick, quizzing Hammond, said the investor group, led by French state-controlled EDF, was receiving twice the normal rate of return for an off-balance-sheet project such as that, and over a 35-year period, and asked Hammond to justify it.

Artist's impression of Hinkley Point C (Credit: EDF)

Hammond said that the government was reviewing the entire contract with EDF and would decide on it by the end of the month. It assumed a rate of return to EDF of 9% which he said was "high" but, as structured, the deal transferred all the risk to the operator. "There will be a penalty for a delay, not only in terms of deferred return on its capital, but there will also be a lower price," he said.

EDF is taking the lead, with China General Nuclear taking one-third stake, in the 3.2-GW nuclear complex on the understanding that China will build other plants later on its own. Prime Minister Theresa May has not given a firm indication which way the decision will go but the very fact of a review came as a surprise as the only hurdle was expected to be the French final investment decision, which in the end went to a 10-7 vote in favour.

There have been mostly negative comments in the UK press regarding the project, owing to the size of the implicit subsidy in the price, as the wholesale market has plummeted since the deal was struck but the offtake price remains the same: £92.50/MWh. Other ways could be found to deliver the same energy at a lower price, say analysts and the CEO of a leading UK utility, SSE. Hammond had earlier in the summer expressed support for the project.

William Powell