Management meltdown at French nuclear firm a worry for UK
Published 09/03/2016 | 02:30
Management upheaval at EDF in France has exposed Britain's reliance on the French energy group's ability to deliver a planned £18bn (€23bn) nuclear power plant in southwest England.
EDF's chief financial officer Thomas Piquemal quit on Monday in protest over the balance sheet risk posed by the Hinkley Point C project, one of a series of expensive challenges that the debt-laden and state-controlled group faces. EDF and the British and French governments are saying the project remains on track, but turmoil at the top of EDF could mean a further delay to a plan that is already two years behind schedule.
For Britain, a slippage beyond 2025 would threaten the security of electricity supply to its millions of households as alternatives are few and far between.
"This reiterates the need for a Plan B," said Tim Yeo, former Conservative Party chairman of parliament's Energy and Climate Change select committee. Hinkley Point C is forecast to provide around 7pc of Britain's electricity needs when it is fully operational.
"A further delay would be a step back for the UK government because nuclear is one of the three pillars of its long-term energy strategy," said Coralie Laurencin, associate director of European power at consultancy IHS Energy.
"Having this first new reactor taking so much time is not helpful."
Britain has two alternatives it can consider: placing hopes on other new nuclear plants or incentivising the construction of gas-fired power plants. The development of large-scale renewables, such as offshore wind, is the other main plank of energy policy as Britain tries to cut greenhouse gas emissions.
Two other nuclear groups are planning to build plants in Britain - NuGen, a joint venture between Toshiba's Westinghouse and France's Engie, and Hitachi's Horizon.
NuGen has set its sights on a start-up of its Moorside nuclear plant in northwest England for 2024, earlier than Hinkley Point C Horizon said it was targeting a start-up in the first half of the 2020s of its Wylfa plant in Wales.
Together, these two projects will have an installed capacity of 6.3 gigawatts (GW) once fully operational, compared with 3.2 GW at Hinkley Point C.
However, these plans need to clear a number of hurdles which project leader EDF has already overcome for Hinkley Point C.
These include regulatory approval for the construction of their respective nuclear reactor designs and receiving state aid clearance from the European Commission for an electricity strike price yet to be agreed with the British government.
Britain agreed in October 2013 to guarantee EDF a price of £92.5 per megawatt-hour (MWh) for electricity produced at Hinkley Point C, around three times the current market price.
When Hinkley Point was announced in 2013, nuclear reactor maker Areva was meant to take a 10pc stake in the project. EDF has since initiated the takeover of Areva's struggling reactor business, leaving the French energy giant with a hefty 66.5pc majority stake.
China's General Nuclear Corporation (CGN) has agreed to buy into one third of the project.
The departure of CFO Piquemal was linked to his unwillingness to take on too much risk for a group that has net debt of over €37bn, according to a source close to the matter.
Gas-fired power plants are the main alternative to nuclear. (Reuters)