Hinkley Point: Surprise delay for nuclear plant deal
- 29 July 2016
- From the section Business
Plans to build the first new UK nuclear plant in 20 years have suffered an unexpected delay after the government postponed a final decision until the early autumn.
French firm EDF, which is financing most of the £18bn Hinkley Point project in Somerset, approved the funding at a board meeting.
Contracts were to be signed on Friday.
But Business Secretary Greg Clark has said the government will "consider carefully" before backing it.
EDF chief executive Vincent de Rivaz has cancelled a trip to Hinkley Point on Friday following Mr Clark's comments.
Critics of the plan have warned of environmental damage and potential escalating costs.
They are also concerned that the plant is being built by foreign governments. One third of the £18bn cost is being provided by Chinese investors.
Analysis: Simon Jack, BBC business editor
Hours after EDF's board voted to approve the £18bn power plant on Thursday, the government launched a further review of the project.
This stunning new development came all the way from the top of government and the timing seemed calculated to cause maximum impact.
EDF executives were taken completely off guard, the post-Brexit run of major investment is abruptly halted and what precious entente cordiale in Anglo-French relations there is left after the EU referendum result seems diminished.
Is it a genuine pause for a new government to read the small print of a project that is two administrations old, or a signal of a potential change in policy?
Tom Greatrex, the chief executive of the Nuclear Industry Association, urged the government to make a decision as soon as possible.
"We need to get on and do this and that's why I'm hoping the government make their decision very soon because if it goes on for a lengthy period of time we are going to run the risk of having real problems in terms of our energy supplies," he said.
"Then what happens is that we end up paying a lot more and we end up paying for much more dirty power which we can't afford to do if we are to meet our climate commitments."
Claire Jacobson, head of climate, energy and environment policy at the EEF manufacturers' organisation said the government's decision was "yet another blow to a decision that has been hindered by many delays and uncertainties".
Hinkley Point C is expected to provide 7% of the UK's total electricity requirement.
Announcing the approval of investment on Thursday, EDF had described the plant as "a unique asset for French and British industries", saying it would benefit the nuclear sectors in both countries and would give a boost to employment.
However, the project has been hit in recent months by concerns about EDF's financial capacity.
Despite the Chinese investment, Hinkley Point would remain an enormous undertaking for the stressed French company, which has had to raise money from its owners.
Earlier this week, EDF shareholders approved plans to issue new shares to raise €4bn (£3.4bn) to help pay for the project.
Ahead of Thursday's vote on whether to approve the project, an EDF board member, Gerard Magnin, resigned, saying the project was "very risky" financially.
Earlier this year, EDF's finance director, Thomas Piquemal, had resigned amid reports he thought Hinkley could damage EDF itself.
'Too big to fail'
Environmentalists are also concerned about the plan. Greenpeace executive director John Sauven said: "Countless experts have warned that for British families this power station will be terrible value for money.
He added that EDF's decision to go ahead with the investment, "doesn't prove the UK is open for business post-Brexit - it just shows the Hinkley deal became too big to fail in the eyes of British and French politicians".
The campaign group added that more investment was needed for renewable energy such as offshore wind.
Hinkley Point timeline
Jan 2006 - Government proposes nuclear as part of future energy mix
Mar 2013 - Construction of Hinkley Point approved
Oct 2013 - UK government agrees £92.50 per megawatt-hour will be paid for electricity produced at the Somerset site - around double the current market rate at the time
Oct 2015 - EDF signs investment agreement with China General Nuclear Power Corporation (CGN)
July 2016 - EDF board approves final investment decision, but the UK Government postpones a final decision on the project until autumn.