* First new nuclear contracts in Europe since Fukushima
* China's CGN to help fund, build 14 billion pound project
* Project's state aid needs clearance from EU competition
* Critics warn of risks in fixing power price decades ahead
By Karolin Schaps and Geert De Clercq
LONDON/PARIS, Oct 20 Britain is set to sign a
deal with France's EDF for the first nuclear plant to
start construction in Europe since Japan's Fukushima disaster
raised safety concerns worldwide, at a cost estimated at around
Under the deal, expected to be announced on Monday, the
French utility will lead a consortium, including a Chinese
group, to construct two European Pressurised Water Reactors
(EPRs) designed by France's Areva.
Industry estimates, based on other nuclear projects, put the
cost at around 14 billion pounds or more than 16 billion
EDF's long-time partner China General Nuclear Power Group
(CGN), possibly in combination with China National Nuclear
Corporation (CNNC), is expected to have a 30 to 40 percent stake
in the consortium, with Areva taking another 10 percent,
according to newspapers including France's Les Echos and
Britain's Sunday Telegraph.
EDF and the British prime minister's office declined to
comment on the media reports.
The two reactors, each with a capacity of 1.6 gigawatts,
would together make up nearly five percent of British generating
capacity and increase energy security in the country, which
needs to replace 20 percent of its ageing and polluting power
plants over the coming decade.
The project is a boost for the global nuclear industry,
which has seen projects cancelled since the 2011 Fukushima
Germany decided to phase out nuclear power, Italy scrapped a
planned nuclear programme and France has pledged to cut atomic
power to 50 percent of its electricity mix from 75 percent
Britain's government and main opposition parties support
nuclear power and anti-nuclear sentiment among the population is
muted by comparison with other parts of Europe.
George Borovas, nuclear specialist at law firm Pillsbury,
said Britain is a unique environment for nuclear, given
political support, a relatively strong economy and an existing
"If nuclear can't work in the UK, where else?" he said.
Two other groups have put forward plans to build new nuclear
plants in Britain and will be scrutinising the EDF deal closely:
Japan's Hitachi via its Horizon project and the NuGen
project of France's GDF and Spain's Iberdrola.
Under the deal, the EDF-led consortium will build the two
reactors at its own risk, but the government will guarantee a
minimum price for power generated from the proposed Hinkley
Point C plant in Somerset, southwest England, adjacent to an
existing nuclear power plant run by EDF.
EDF operates 15 nuclear reactors in the UK following its
12.5 billion pound takeover of British Energy in 2008-2009.
The so-called strike price, over which EDF and Britain have
wrangled for more than a year, is expected to be set at about 92
pounds per megawatt-hour, more than twice current market levels,
and could be valid for 35 years, according to some media.
If British electricity market prices fall below the agreed
threshold, EDF would be reimbursed for the difference, while it
would have to pay back money in excess of the price.
The suggested deal comes amid an increasingly bitter row
over electricity prices in Britain, with two of the main six
utilities announcing more than 8 percent rises for this winter.
Several British media were critical of the Hinkley Point
project, saying it would increase power prices.
Analysts said it was too early to estimate the impact of the
Hinkley Point deal on EDF's outlook and share price as details
had yet to emerge, and the deal still needs to get European
Direct market support for new nuclear plants is
unprecedented in Europe since liberalisation started two decades
ago, and Britain will be the first country to seek consent from
the European Commission's competition department for this.
Earlier this month the Commission ruled out including a
reference to nuclear power in revised state aid rules, an
indication the UK request could be difficult.
Critics say that by freezing the power price for a nuclear
plant for decades ahead, the government is taking huge risks.
"Why would anyone begin to imagine that you know what the
price of wholesale electricity will be in be 2058?" said Tom
Burke, environmentalist and former government energy adviser.
For EDF too the project is a major risk. At the EPR reactor
EDF is building in Flamanville, France, costs ballooned from a
budgeted 3.3 billion euros in 2005 to 8.5 billion euros late
last year. An EPR built by Areva in Olkiluoto, Finland, has
suffered similar overruns and is also years behind schedule.
"If the Hinkley Point project ends up costing 20 billion
euros, the consortium will have to cough up the 4 billion euro
difference," a Paris-based equities analyst said.
But two EPRs being built by EDF's Chinese partner CGN are on
schedule and on budget, and EDF hopes that the Chinese, besides
financing, will bring project management skills gathered from
constructing more than a dozen nuclear plants in recent years.
British finance minister George Osborne signed an agreement
in China on Thursday allowing Chinese companies to enter
Britain's nuclear power sector.
China, which is developing its own reactor, sees the Hinkley
Point deal as a first foot in the door in Europe and hopes to
use the British reference to sell nuclear plants worldwide.
Eventually, this could bring it into competition with EDF
and Areva, on whose technologies the Chinese designs are based.