Horizon CEO says Hinkley model is a one-off

20 December 2017

Duncan Hawthorne, CEO of Horizon Nuclear Power, says a consensus is forming across government and industry that the Hinkley financing model - which involved EDF and its Chinese partner CGN covering the entire cost of construction - will not be repeated, according to his comments to the Financial Times published yesterday. Horizon is the UK subsidiary of Hitachi-GE, which regulators informed last week had successfully completed the Generic Design Assessment (GDA) process for its UK Advanced Boiling Water Reactor (UK ABWR).

Horizon plans to build two ABWR units at Wylfa Newydd site on the island of Anglesey in north Wales and start them up in around 2025. Areva/EDF's UK EPR design became the first reactor design to complete the GDA process, in December 2012. The final agreements enabling construction of two EPRs at Hinkley Point C to proceed were signed in September last year by the UK government, EDF and CGN. These agreements included the contract-for-difference (CfD) - the ratepayer-backed guaranteed price for electricity generated by Hinkley Point C - that guarantees the plant will get GBP92.50 per MWh for its first 35 years of operation.

Yesterday's Financial Times article said constructive talks were under way between Horizon and the Treasury and the business department about alternative funding structures. Although Hawthorne declined to provide further details, the newspaper said options are thought to include the possibility of the UK and Japanese governments injecting equity "or using their financial muscle" to help lower debt financing costs.

The newspaper cited a report from the Commons public accounts select committee last month, which accused ministers of "grave strategic errors" in awarding EDF a contract "forecast to cost consumers GBP30 billion above market rates for electricity from Hinkley over 35 years".

Hawthorne told the newspaper that Treasury officials are "fully engaged" with Horizon and "committed to finding a solution" that will allow Wylfa to be built at a lower cost than Hinkley. But he warned that Hitachi, having so far invested about GBP2 billion before a shovel has been placed in the ground, needs to see firm progress in 2018.

"We need to see ... some agreement with government on heads of terms ... by the middle of next year," Hawthorne said. "There is definitely a point at which the Hitachi board is going to say, 'This is too much exposure'."

Hawthorne said there will have to be "daylight" between the strike price of Hinkley and Wylfa for the latter to be politically acceptable and economically competitive. But he said nuclear power merits a premium for its greater reliability compared with intermittent wind and solar.

"We are an insurance policy for long-term stable supply and there is a price for that certainty," he said.

Nuclear power has helped the UK cut emissions much faster than Germany, where the nuclear phase-out has left the country dependent on coal for 40%. Energiewende, or energy transition, was introduced after Germany's government decided to phase out nuclear power in reaction to the accident at Japan's Fukushima Daiichi nuclear power plant in March 2011. At the time, Germany was obtaining around a quarter of its electricity from 17 nuclear reactors.

"Germany is a basket case and it is only a matter of time until people realise [its energy policy] doesn't work," Hawthorne said.

Researched and written
by World Nuclear News