Chinese investment in EDF’s Hinkley Point nuclear power plant has been all but confirmed, with any uncertainty slowly dissipating as it has emerged that seven new London-based firms have been incorporated in the name of CGN’s UK operations director, the Guardian has reported.
The investment deal, first announced last year, involves Chinese state-owned nuclear corporation CGN purchasing a 33.5% stake in the project for £6 billion (a third of the estimated cost). Heads of terms of the agreement have already been signed, but these terms do not become legally binding until final contracts are drawn up and signed off – this has not happened yet.
“Discussions practically completed”
Both EDF and Zhu Minhong (CGN’s UK operations director) have been keen to make it clear that the remaining steps amount to little more than a formality and that such a delay is to be expected given the size and complexity of the project (and as a result of the investment deal itself).
Zhu Minhong’s latest statement on the issue is as follows: “We have agreed the package deal in terms of the heads of terms. We then spent our time to translate the head of terms into long-form. What I can say today is that our discussions are practically completed.”
EDF’s CEO, Jean-Bernard Lévy, made a similar point back in February. He said: “We have not yet fully finalised these discussions, going from this agreement in principle to a set of finalised documents. There are thousands and thousands of pages to agree on and this still needs a little work.”
However, EDF’s former chief financial officer, Thomas Piquemal, resigned earlier this year following alleged disagreements with Lévy about when this Chinese investment deal should be finalised. Piquemal reportedly believed than a delay of some three years would be required for the company to regain some of its financial health, sparking discussion as to whether or not the current delays have indeed been purely logistical.
“Complexity itself is a warning”
Peter Atherton, of London-based investment bank Jefferies argued that the complexity of the whole deal, rather than simply being a logistical hurdle, was telling of more pressing issues.
He said: “Complexity itself is a warning that this project is likely to run into some kind of problem. Often when you have a major infrastructure project that runs into problems…complex contracts have added to the risk and uncertainty over who bears the responsibility for which costs.”
He added, referring directly to Hinkley: “I would be staggered if anyone in government could tell you where exactly the risk lay.”
These comments gain further traction when considered in light of the leaked clause in the agreement between the UK government and EDF appears to place a £22 billion liability on the UK taxpayer if any incumbent government decides to close down the plant between now and 2060.
The Department of Energy and Climate Change, however, did their best to assure that “a deal of this scale is by its nature complex, but we are clear on the construction and financing risks, which fall firmly on the developer rather than bill payers”.
Chinese Commitment
Now – in a move that is at once likely to increase the worries many have regarding the project’s complexity and assuage the worries of those concerned about China’s financial commitment – it has been revealed that seven new companies have been incorporated over the last seven months at the London address used by CGN in the name of Zhu Minhong.
Two of the companies (Bradwell Power Generation Company Ltd and Bradwell Power Holding Company) clearly relate to CGN’s interest in their own plans to work on reactors at Bradwell in Essex.
The purpose of the others is less clear. Some (e.g. International Nuclear Investment Ltd) seem fairly straightforward, others (e.g. Libra International Ltd and Sagittarius International Ltd) less so.
However, the consolidation of Chinese assets in London by the head of CGN’s operations in the UK does seem to imply some positivity regarding Beijing’s commitment to their nuclear projects over here.
