French energy group EDF has warned it could end up shouldering more of the soaring bill for Hinkley Point C as its Chinese partner may fail to meet its share of extra payments to finance the plant.
EDF admitted on Friday that the cost of building the plant, a flagship project, could rise above £32bn when factoring in recent inflation levels, more than 20 per cent higher than its estimate last year closer to £26bn.
The plant, in south-west England, is the first new nuclear power station to be built in Britain for almost 30 years. Its completion date has been repeatedly pushed back because of spiralling costs.
The increase, caused by surges in material prices several billion above the most recent estimates, is nearly 80 per cent more than the cost of £18bn in 2016, when EDF first started work on the project.
State-controlled EDF told investors on Friday that, when accounting for inflation, a more accurate cost for the project was now £32.7bn.
The French group and its state-owned Chinese partner CGN would be asked in the second half of 2023 to make “voluntary” additional equity payments under a compensation mechanism for cost overruns, as “the project’s total financing needs exceed the contractual commitment of the shareholders”, EDF said.
But it added that the “probability that CGN will not fund the project after it has reached its committed equity cap is high”.
That would leave EDF exposed to having to shoulder more of the costs, under the term of the contract.
As part of its original 2016 deal with CGN, the Chinese developer agreed to meet 33.5 per cent of the £18bn estimated for Hinkley Point C’s construction costs at the time, with EDF paying the remainder.
EDF declined to comment further.
The warning on Hinkley Point C came as the state-controlled group reported a record €18bn loss after a series of outages at its French reactors hurt its output.
The UK government last year paid China’s CGN an estimated £100mn to end its involvement in another UK nuclear plant, Sizewell C on England’s east coast, after relations with China soured.
EDF and the UK government are now teaming up on the project but hoping to get other outside investors on board.
The higher costs for Hinkley Point C were based on inflation indices as of June 30 2022, EDF said, so the current value could be even higher if taking into account cost increases in the second half of last year.
EDF’s new boss Luc Rémont vowed on Friday to continue boosting production this year after a record number of outages at its French reactors in 2022, as well as a government cap on retail electricity prices, hit the group’s finances.
The outages sent EDF’s output tumbling just as demand for electricity rose across Europe. The group, usually a major exporter, was forced to buy expensive electricity on volatile wholesale markets.
The group is aiming for French nuclear output to reach between 300 and 330 terawatt-hours (TWh) in 2023, up from 279 TWh last year — its lowest level since the late 1980s.
