Dec. 6 (Bloomberg) — Electricite de France SA’s 2.5
billion-euro ($3.3 billion) cost overrun at a French reactor
will probably influence talks with the U.K. government over
paying for nuclear projects in England.
The announcement earlier this week may be a tool to secure
a better power price for a reactor in the U.K., Liberum Capital
Ltd. said. The cost of building EDF’s EPR reactor at Flamanville
in Normandy has more than doubled to 8.5 billion euros because
of changes to its design after Japan’s Fukushima disaster.
EDF is negotiating with the U.K. government on a guaranteed
price for atomic power. The Paris-based company expects to make
an investment decision by the end of the year. Parliament is
debating legislation published last week designed to encourage
EDF and other investors to build 110 billion pounds ($177
billion) of generation capacity and grid upgrades.
“This is all part of a backdrop to use their misfortune in
France in a positive way to get a very high price out of the
U.K. government,” Tony Roulstone, director of the University of
Cambridge’s nuclear energy masters program, said by phone. It’s
part of the “negotiating in public” over the price.
EDF Energy, the French utility’s U.K. unit, owns eight
existing nuclear plants in the U.K. and will build the country’s
first new reactor since the 1990s if the Hinkley Point project
in Somerset gets the final go-ahead.
Dominic Nash, a utilities analyst at Liberum, said he
didn’t think “it is any coincidence that they’ve announced this
towards the end of the year.”
Fair Price
The government would only reach an agreement on a strike
price that is fair, affordable and is consistent with the
government’s policy of no public subsidy for new nuclear, an
official at the Department of Energy said by e-mail. EDF Energy
declined to comment on negotiations.
EDF and the government haven’t said what power price is
under discussion for Hinkley point. The so-called strike price
will be written into a contract for difference that guarantees a
minimum price for power regardless of prevailing market
conditions. The contract mitigates the risk involved in building
a nuclear reactor, which are far more expensive to construct
than other power plants.
John Hayes, an energy minister, said Britain would
“absolutely” refuse a deal that placed too great a burden on
consumers who ultimately fit the bill.
Business Case
Vincent de Rivaz, chief executive officer of U.K. unit EDF
Energy, said on Oct. 23 that a more compelling business case was
needed before the company makes a final investment decision. He
told lawmakers reports EDF wants a strike price of 140 pounds a
megawatt-hour, more than double today’s market rate, were
“utterly rubbish.”
“This should allow EDF to ask for a price that covers the
cost of construction of new nuclear build based on the
experience of the group in France,” Macquarie Group Ltd.
analysts said in a note.
Hayes told lawmakers this week the strike price would be
known by the middle of next year.
“No one has a clue of the costs required to build nuclear.
I think that nuclear could be prohibitively expensive,”
Liberum’s Nash said. “If your glass is half full you’d say that
the first-of-the-kind pain that EDF is going through should mean
that they won’t necessarily replicate those errors.”
EDF will use reactors made by Areva SA, which said this
week EDF’s new estimate at the Flamanville reactor “is not
representative of the price of an EPR reactor in the series
offered in the market today.”
To contact the reporter responsible for this story:
Sally Bakewell in London at
Sbakewell1@bloomberg.net
To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net
