French government presses the UK to help fill multibillion-pound hole in nuclear projects

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The French government is pressing the UK to help plug a multibillion-pound hole in the budget of nuclear power projects being built in Britain by France’s electricity operator EDF.

The call for a contribution from the UK is likely to cause tensions between Paris and London, a day after state-owned EDF admitted its construction of a new nuclear power station at Hinkley Point in Somerset would suffer further costly delays, taking the bill to as much as £46bn.

The UK has said it will not put cash into the project, which counts EDF as a majority shareholder, and is already backed by a government guarantee on its revenues once it is up and running.

But Paris is pushing for a “global solution” that would also encompass funding issues at another planned UK plant, Sizewell C, said a French economy ministry official and another person close to the talks.

“It’s a Franco-British matter,” the French economy ministry official said. “The British government cannot at the same time say EDF has to figure it out alone on Hinkley Point and at the same time ask EDF to put money into Sizewell. We’re determined to find a global solution to see these projects through.”

Sizewell in Suffolk has a different financial set-up to Hinkley. The UK this week said it would inject another £800mn of state funds, bringing its total contribution to £2.5bn at the £20bn plant, where it is the top shareholder. Its partner EDF has no obligation to put more money in.

French officials said discussions on various options had begun several months ago with British counterparts, although they acknowledged London had flagged budgetary constraints that would have to be taken into account.

In the UK, a government official played down the talks, adding that on Hinkley Point: “Costs will be the responsibility of EDF.”

An EDF executive told the BBC on Wednesday that the French company picks up “the tab for the cost overruns”.

EDF on Tuesday warned Hinkley Point would not now be completed until 2029 at the earliest, four years later than its original start date, while the two reactors could cost up to £46bn to build at today’s prices, compared with a £18bn budget in 2016.

Other factors might play into the discussions, however. Under Prime Minister Rishi Sunak, Britain took the political initiative to eject Chinese group CGN as an investor in Sizewell — leaving that project in need of fresh private capital, but also prompting CGN to pull back from Hinkley, where it is a 33.5 per cent shareholder.

The Chinese group has fulfilled its contracted payments on Hinkley but has no obligation to fund over-costs and stopped doing so a few months ago.

“The French don’t have many levers here but the CGN issue is a very real one,” a third person close to the talks said.

Finding private investors to make up the Hinkley shortfall may be tough, several people close to the group said, although formulas such as state guarantees could be discussed.

EDF is only just coming out of a period of financial turmoil, and has big investments to make at home, too, in the coming decades. It was fully renationalised last year.

“Our goal here . . . is for what’s happening at Hinkley Point, with the delays and the issue with the Chinese partner’s decision, not to impact EDF’s financial trajectory excessively,” the French economy ministry official said. 

However, one UK nuclear industry figure said that EDF’s plight at Hinkley was the consequence of signing up to a deal with the UK government a decade ago, which at the time was criticised for being too generous to the French group.

Under a so-called contract for difference signed with the state, construction costs are not covered but future electricity production is backed up by subsidies in case power prices fall below a certain threshold.