SPECIAL REPORT | UK
Financing future build in the UK
Speakers at two recent industry events discussed financing options for UK nuclear new build, as the future approach remains uncertain. Janet Wood reports
Above: The nuclear island at unit 1 of Hinkley Point C Photo credit: EDF Energy
NEXT YEAR WILL SEE THE reactor pressure vessel for Hinkley Point C (HPC) arrive on site, according to Humphrey Cadoux-Hudson, chief executive of Sizewell C, the planned follow-up plant to HPC Speaking at the Westminster Energy, Environment
Janet Wood
Expert author on energy issues
& Transport Forum policy conference ‘Next steps for developing the UK nuclear sector and delivering new build projects’, Cadoux-Hudson was keen to highlight the importance of reducing the construction cost and risk of new nuclear by “making a copy”. He illustrated that by reference to the two units at HPC, saying that, for example, at the second unit 45% more steel had been installed in a comparable time frame, and the time required to install a unit 2 cooling system had been half that at the first unit. He added that “right first time by experienced people” also resulted in better quality. Cadoux-Hudson had no more news on how negotiations with the government on a ‘regulated asset base’ (RAB) funding model could be used for Sizewell C, beyond saying that the company was having “very good discussions with government”. And although a detailed policy document on the RAB model has been expected for months, Anne-Marie Trevelyan, government minister for Energy, Clean Growth and Climate Change, in an address to the World Nuclear Association (WNA) annual symposium, said only that negotiations “had been taking place”. Exploring the figures behind the RAB option, Cadoux- Hudson said that of HPC’s £92.50/MWh price, only £12-13
14 | October 2021 |
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was the cash cost of construction. Operation and waste management represented another £25 “and the rest is the cost of finance”. Of that, half would be the cost of capital allowed for a regulated asset and “the other half is the risk of attracting private finance. If we can reduce that the cost of capital should come down”. But comments by Darryl Murphy, Head of Infrastructure
— Real Assets, at Aviva Investors, suggested that might not be reduced as much as had been hoped. Saying that appetite from private investors had so far been “minimal”, he noted that the character of the Sizewell C project was very different from that of other RAB projects, which are generally networks. In addition the scale was very different: the Thames Tideway Tunnel, often mentioned as a comparator, was less than £5 billion. Sizewell C was nearer the scale of the recently-announced UK Infrastructure Bank which would be capitalised at £22 billion. The project “needs a range of debt and equity investors,” Murphy said and that required a “very delicate” balance of risk between government, consumers and investors. Potential investors would want to see political commitment to nuclear beyond a single plant – and SMRs, he noted “feel a long way away”. Murphy said the ESG case “is critical if the large scale
capital required is to be mobilised” and that point was discussed in detail by Fiona Reilly, managing director of FiRe Energy, at the WNA annual meeting. She said that “A lot of green money has gone into climate finance and you [nuclear] need to be able to access it”. To do that it was
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