UK delays €21bn deal for nuclear plant at Hinkley Point

Executives from French electricity company EDF have cancelled their trip to southwest England to sign contracts for the Hinkley Point nuclear plant after Britain backed out of the €21.4 billion deal, at least until autumn.

The British postponement was announced immediately after a painstaking 10-7 vote by the EDF board in Paris to go ahead with the project. The British government wanted to know first whether EDF was fully committed to it, the Press Association reported.

London has left Paris in the lurch regarding a contract deemed crucial to the future of the utility giant, which is 85 per cent state-owned, a little over a month after the Brexit vote plunged European economies into uncertainty.

It has been suggested Britain may want to use Hinkley Point in Somerset as a card in Brexit negotiations, in order to obtain better trade terms from France.

Announcing the delay, the British business and energy secretary Greg Clark said: "The UK needs a reliable and secure energy supply, and the government believes that nuclear energy is an important part of the mix. The government will now consider carefully all the component parts of this project and make its decision in the early autumn."

Chief executive Jean-Bernard Lévy said EDF had no advance warning of the British delay, but is ready to sign contracts “as soon as all the parties involved are ready”.

Signed or not

Mr Lévy said he “does not doubt the support of the British government . . . Either a contract is signed or it’s not. In the event, it is not.”

Analysts cited two reasons for the British postponement. The government had signed a 35-year “contract for difference” with EDF in October 2013. It would award a top-up fee to EDF if power prices fell below £92.50 per megawatt hour. Baseload power prices in Britain are currently under £40 per megawatt hour.

The government is believed to fear political consequences if it pays more than twice the going rate for electricity from a Franco-Chinese consortium.

Distrust of China is believed to be the other reason. EDF would own two-thirds of Hinkley Point and China General Nuclear Power would own the other third.

Nick Timothy, the prime minister chief of staff, wrote on the Conservative Home website last October that it was "baffling" Westminster would allow Chinese investment in such sensitive infrastructure.

“Rational concerns about national security are being swept to one side because of the desperate desire for Chinese trade and investment,” Mr Timothy wrote. He argued against giving a “hostile state” access to nuclear power plant computers. To do so, he warned, might enable the Chinese to “shut down Britain’s energy production at will”.

Unions split

British trade unions reacted angrily to the delay, while French unions who oppose the project praised it.

Ms May's decision to postpone the Hinkley Point contract was "bewildering and bonkers", said Justin Bowden, national secretary for energy at GMB union. It endangered 25,000 new jobs "immediately after Brexit" and was "a gross error of judgment and must be reversed".

The “foolish delay” would also call into question other major infrastructure projects, Mr Bowden said. These include the HS2 high speed rail network and the Heathrow/Gatwick expansion.

Labour's shadow energy secretary, Barry Gardiner, accused the government of being in "absolute chaos" and said it was sending a message to investors that "the British government just doesn't know what it is doing when it comes to major infrastructure projects".

In France, a federation of the CGT, CFE-CGC and FO unions, which oppose Hinkley Point on the grounds it would bankrupt EDF, said the British decision showed "the precipitation with which the EDF acted [in voting the project] served no purpose".

Urgent to wait

The French unions asked for a two- to three-year postponement. “It was and is more than ever urgent to wait,” the statement said.

The European Pressurised Reactor (EPR) is meant to be the safest nuclear power plant in the world. Though several are under construction, none has yet produced a kilowatt of electricity.

An EPR under construction by EDF in Finland is nine years behind schedule and €5.2 billion over budget. Another, at Flamanville on the Channel coast, is six years late and €7.2 billion over budget.