Oct. 14 (Bloomberg) -- The U.K. is “extremely close” to announcing a deal with Electricite de France SA to build Britain’s first nuclear power station since 1995, Energy Secretary Ed Davey said.
The agreement may be announced as soon as this week after two or three remaining issues are resolved, said a government official briefed on the talks, who didn’t want to be identified before negotiations are completed. Paris-based EDF would build two reactors at Hinkley Point in southwest England at an estimated cost of 14 billion pounds ($22 billion).
“We’re extremely close for a deal with EDF,” Davey said in a BBC Television interview yesterday. “If and when we get that deal I’ll announce it to parliament, and I think I’ll be able to show it’s extremely good value for money for customers.”
Davey and EDF have taken almost a year to reach an agreement on Hinkley point, which hinges on the price the plant will get for the electricity it generates. Negotiations are taking place based on a price of about 93 pounds a megawatt-hour, the government official said, almost double the 49-pound average in U.K. power markets over the past year.
EDF spokesman Jonathan Levy declined to comment.
EDF shares rose as much as 65 cents, or 2.7 percent, to 25.16 euros in Paris today, the highest since Aug. 1. The stock traded at 25:10 euros at 10:35 a.m. local time.
The shares were also buoyed by a report in Journal du Dimanche that EDF will allowed to operate reactors in France for 50 rather than 40 years.
Both developments are “positive,” for the French utility, according to a report by Banco BPI SA analyst Louis Boujard. Extending the lives of French atomic reactors would raise earnings and “trigger a further deleveraging.”
The U.K. wants new nuclear reactors to replace the country’s existing atomic fleet, which is scheduled for closure by 2023. When completed, Hinkley Point would be able to generate more than 3,200 megawatts, according to EDF, or about 7 percent of U.K. power demand.
As well as helping to replace older plants, the project would be one of the U.K.’s single largest investments and pressing ahead would be a boost to the government’s policy of using large infrastructure investment to spur economic growth. EDF says the project will create 5,000 jobs during construction, generating 100 million pounds a year for the regional economy.
To help finance the plant, EDF will sell a 49 percent stake to China General Nuclear Power Corp., the Financial Times has reported. Chancellor George Osborne will sign a broad agreement on nuclear cooperation between the U.K. and China on a visit to the Asian country this week, the FT said on Oct. 12.
“The Chinese, along with the Koreans and the Japanese and other countries, are very interested in the opportunity in Britain’s nuclear sector,” Davey said in yesterday’s interview, declining to comment on whether China will invest in Hinkley Point. “We’ll see massive Chinese investment, not just in nuclear, but across the board.”
At 93 pounds, the guaranteed rate for nuclear power would be below the 155 pounds a megawatt-hour promised to offshore wind-power developers for four years from next year. The offshore rate will decline to 100 pounds by 2020.
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