Reactor design adapted to requirements of British regulators
Company sees risk of delay, reducing expected rate of return
Electricite de France SA said the final bill for building two new reactors in the U.K. could rise to more than 20 billion pounds ($26 billion), reflecting changes to supplier contracts and plant design, and potential construction delays.
The estimated completion cost for the Hinkley Point C reactors in southwest England is now 19.6 billion pounds, up from 18 billion pounds last September, the Paris-based company said Monday in a statement. A slippage in schedule could add a further 700 million pounds, it said.
“We’ve been able to finalize contracts with some suppliers only after the final investment decision was made” last year, Vincent de Rivaz, the head of EDF’s U.K. subsidiary, said on a conference call. “As we entered the detailed design phase, several adjustments that are specific to the U.K. and to the regulators’ request have emerged.”
The review -- just 10 months after EDF signed its contract with the British government -- not only cuts the expected rate of return but raises concern costs could climb further amid doubts over EDF’s ability to manage large nuclear projects on budget. The Hinkley plan is already controversial in the U.K., where a state auditor warned it may cost electricity consumers 30 billion pounds over the lifetime of the contract. It’s even been contentious within EDF itself, with finance chief Thomas Piquemal resigning last year.
“Every nuclear power station currently being built in Europe and the U.S.A. has gone massively over time and over budget,” John Sauven, executive director at Greenpeace U.K., said in a statement. “Long before Hinkley is even finished, offshore wind will be producing far cheaper and safer power.”
Rate of Return
EDF said Monday there’s a risk of a 15-month delay for Hinkley Unit 1 -- initially planned for completion at the end of 2025 -- and a nine-month holdup for Unit 2, due mid-2026. It now expects a rate of return of 8.5 percent from the project, half a point less than before, with potential delays pushing that down to 8.2 percent. The company maintained profit targets.
The cost overrun “shouldn’t be a huge problem” for EDF’s finances given the long construction time, said Elchin Mammadov, an analyst at Bloomberg Intelligence in London.
De Rivaz said he sees no impact on the contract from tweaking costs and timeframes. While the recent weakening of the pound against the euro is making procurement more expensive, it’s reducing funding costs, he said, adding that construction is progressing as planned and EDF remains “mobilized” to keep it on track.
Labor unions had wanted the Hinkley project postponed to benefit from feedback on reactors under construction in France, Finland and China. At Flamanville in Normandy, where EDF is building a reactor of the same design proposed for Hinkley, costs have more than tripled to 10.5 billion euros ($12 billion) and construction is six years behind schedule.
The U.K. plant will earn 92.50 pounds a megawatt-hour for the power it generates over 35 years, with the government paying the difference between the market value of the electricity and EDF’s contracted rate.
EDF owns 66.5 percent of the project and China General Nuclear Power Corp. owns the rest.
— With assistance by Jess Shankleman