EDF seeks financial support from French state for Hinkley Point C
EDF will not go ahead with the contentious £18bn Hinkley Point C nuclear project in the UK unless it wins further financial support from the French government, according to a leaked letter by the utility’s chief executive.
Jean-Bernard Lévy, who has come under fire this week for pressing ahead with the project, said in the letter seen by the Financial Times that he was negotiating to “obtain commitments from the state to help secure our financial position”.
He added he would “not engage in the [Hinkley Point] project before these conditions are met”, without going into detail on how this might occur.
Two people close to EDF said the French state could take a stake in the Hinkley Point C project, or possibly participate in a capital raising by the company, although they said that nothing had been finalised. The government has an 85 per cent stake in EDF.
The letter by Mr Lévy was intended to reassure EDF employees amid growing disquiet over its plans to build two new nuclear reactors at the Hinkley Point power station in Somerset for electricity generation. Thomas Piquemal, EDF’s finance director, resigned last week over concerns that the project could threaten the company’s future.
The Cour des Comptes, France’s state audit body, said on Thursday that the “complexity of both funding and carrying out” Hinkley Point should cause EDF to ask itself if it was the right decision.
Critics have raised concerns about the £18bn cost given EDF’s stretched balance sheet. EDF borrows money every year to pay its dividend, and the company’s €37bn of net debt dwarfs its €19bn market capitalisation.
Worries also exist over the ability of EDF to complete the Hinkley Point project on time. Two other projects in France and Finland using the same technology — the so-called European Pressurised Reactor — are both heavily delayed and over budget. Another in China has also experienced slippage, although less severe.
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Mr Lévy admitted in the letter to employees, which was sent on Thursday, that “the financial context is tense” and that Hinkley Point had been “the subject of much debate”. The final investment decision is expected as soon as April.
Mr Lévy addressed concerns about the construction risk, saying that EDF had learned from its two EPR projects in France and China. “We will benefit from the experience and the feedback,” he said.
He also said Hinkley Point would ultimately be profitable for EDF, with a return of 9 per cent over 60 years. The price the UK government has guaranteed for the wholesale electricity that Hinkley Point C will produce is three times the current going rate.
The construction will represent 15 per cent of EDF’s investment on average for 10 years, said Mr Lévy, leaving “ample room” for other projects such as extending the life of France 58 nuclear power stations, which is set to cost €55bn.
The French and the British governments came out this week to fend off criticism of Hinkley Point and to publicly renew their support.
For the UK, Hinkley is a key part of plans for low-carbon electricity generation.
France, meanwhile, needs to retain its nuclear expertise through exports as it prepares to renew its own fleet of reactors, which provide two-thirds of the country’s electricity.