EDF makes FID on €21bn Hinkley Point C nuclear project in the UK

EDF has made its final investment decision (FID) on the £18bn (€21bn) Hinkley Point C nuclear power project in the United Kingdom, after having secured additional financial resources to build the project. The group had initially set the FID at the end of 2012 (first operation expected in 2017), but it was delayed to July 2014, then to late March 2015. In October 2015 EDF announced that it would take the FID "within a few weeks" but delayed it again in April 2016.



The FID paves the way for signing contracts with the British government and partners. However, the new government has announced a new review of the project, which secured a £92.5/MWh strike price (guaranteed price of €110/MWh at current exchange rates, i.e. more than twice the current wholesale price) over 35 years. This would represent £30bn in subsidies for the British taxpayers but would create 25,000 jobs. The government's decision is expected in early autumn 2016.



The Hinkley Point C project will consist of two 1,630 MW Areva EPR reactors, expected to be commissioned in 2025 at the earliest (construction starting in 2019). Total investment is estimated at £18bn (€21.5bn), with CGNPC investing £6bn (€8.1bn). In September 2015, the UK approved a £2bn (€2.4bn) loan guarantee for the project. EDF will own 66.5% in the project, in partnership with Chinese companies China General Nuclear Power Corporation (CGNPC) and China National Nuclear Corporation (CNNC), which will take over a 33.5% stake in the project.



The project was opposed by the majority of trade unions and by some top executives (former CFO resigned in March 2016, followed by a board member ahead of the FID). The group may have difficulties to fund its own 66.5% stake, after the acquisition of Areva NP and in a context of falling wholesale power prices in Europe, and significant delays and cost overruns in the construction of two EPR projects in Europe, Olkiluoto 3 (built by Areva), and Flamanville in France. In addition, EDF will need to invest at least €55bn to refurbish its existing nuclear fleet in France to operate beyond 40 years ("Grand Carénage" programme).



EDF has secured the approval from the French state, which owns 85.3% in the group, and from its shareholders to carry out a €4bn capital increase (that includes €3bn from the state). In addition, the group will divest 49.9% of its fully-owned subsidiary RTE (French power transmission network operator) to state-owned bank Caisse des Dépôts. RTE operates more than 105,000 km of power lines in France and is estimated at €8.45bn. The amount of the transaction would then exceed €4bn and the sale may be completed in the first half of 2017. By 2020, EDF plans to sell around €10bn in assets to reduce its debt and finance large investments.