21 Sep 2015

Nuclear plant step closer with £2bn Osborne guarantee

The Hinckley Point nuclear plant is a step closer after the chancellor announced a £2bn government guarantee on investment, but critics say it is a bad deal for taxpayers

George Osborne has attempted to shore up plans for Britain’s first nuclear power station in a generation by signing a £2bn guarantee to help fund construction of the Hinckley Point plant.

The chancellor revealed that ministers had signed the guarantee for the plant, which will cost an estimated £24.5 bn to build, on a trip to China partly spent in talks with state-run nuclear companies. Chinese investment is expected to form a major part of the funding.

The guarantee means that the government is still not itself lending any money for the building of the plant, but if the commercial sector invests, its money will be protected if the developers go bust during construction.

It should go some way to smoothing the path for EDF, the French energy company which intends to build the plant and could otherwise struggle to pull together the funding it would need for the project.

The French state-backed company is trying currently finalise a deal with its Chinese partners on funding.

Mr Osborne said the £24.5bn project, to be built by EDF to a French design in partnership with two Chinese companies, would “open the door to unprecedented co-operation” between the UK and China on more nuclear stations.

EDF welcomed news of the government guarantee, but did not say if it put the project back on track.

Earlier this month, EDF admitted the Hinkley project in Somerset, which was intended to allow the plant to generate power by 2023, would be delayed.

The company cannot afford the full £24.5 bn on its own, so has been considering the option of investment from other financial partners – particularly those in China.

The new power station would be Britain’s first new nuclear plant for 20 years and is expected to provide power for about 60 years.

Amber Rudd, energy secretary, said she wanted Beijing to take the lead in developing new nuclear plants in Britain.

Mr Osborne said he believed Britain and China stood on the brink of “a golden decade” of co-operation, adding: “No economy in the world is as open to Chinese investment as the UK.”

However, Lisa Nandy, Labour’s energy spokesperson, said that the guarantee represented a “bad deal” for taxpayers.

“Hinkley Point C is on course to become the most expensive power station ever built. The ever increasing costs of this project could leave Britain’s bill payers paying over the odds for decades because ministers have negotiated such a bad deal.

“There is a role for new nuclear power stations to provide us with low-carbon power supplies but not at any cost. It is especially troubling that the Government is agreeing these extra nuclear subsidies at the very time it is cutting support for more affordable clean energy technologies.”