Hinkley Point C in Somerset looks likely to proceed following the European Commission’s decision to approve the £17bn nuclear plant’s investment contract.
Today’s announcement follows an investigation into whether the so-called contracts for difference (CFD) regime conformed with EU competition rules.
CFDs are intended to guarantee Hinkley Point C’s operator with stable revenues for a period of 35 years. According to Commission, the operator will also benefit from a state guarantee covering any debt the operator will seek to obtain on financial markets to fund the construction of the plant.
The Commission said it was satisfied that the UK had agreed to ‘significantly modify’ the terms of the project’s financing, adding ‘state aid provided will remain proportionate to the objective pursued, avoiding any undue distortions of competition in the Single Market.’
Commission vice-president Joaquín Almunia, said: ‘These modifications will also achieve significant savings for UK taxpayers. On this basis and after a thorough investigation, the Commission can now conclude that the support is compatible with EU state aid rules.’
Welcoming today’s announcement, Lord Hutton of Furness, chairman, Nuclear Industry Association, said: ‘This is an important step in securing the UK’s home-grown low-carbon electricity generation while adding jobs and prosperity to the economy.
‘Reaching this decision has been a long process, but it was right the Commission should thoroughly review all the relevant issues. We look forward to EDF Energy taking its Final Investment Decision with the interested investors.
‘This will set in train an important time for the nuclear sector in the UK as new build projects get under way to replace the current ageing generation. It also gives certainty to other European countries looking at the UK system of contracts for difference as a mechanism to secure their own supply.’
According to the Commission, the new Hinkley Point C nuclear power station will require debt financing of £17bn and will eventually have a capital of approximately £34bn.
Construction costs are estimated at £24.5bn and operations are scheduled for 2023 with an expected operational lifetime of 60 years. The two reactors will produce in total 3.3 GW of electricity – the largest output produced by a single plant in the UK and representing seven per cent of Britain’s electricity generation.