Universal Registration Document 2020

Project Costs and Timeline

A detailed review of schedule and cost has been concluded in January 2021 to estimate the impact of the pandemic so far. This review has concluded the following⁽¹⁾ :

• the start of electricity generation from Unit 1 is now expected in June 2026, compared to end-2025, previous target initially announced in 2016;
• the project completion costs are now estimated in the range of £₂₀₁₅ 22 to23 billion ⁽²⁾. As a consequence, the projected rate of return (IRR) for EDF (different from the project’s IRR) is estimated between 7.1% and 7.2% ^{(3) (4)} ;
• the risk of COD delay of Units 1 and 2 is maintained at respectively 15 and9 months. The realisation of this risk, for which the level of probability remains high, would incur a potential additional cost in the order of £₂₀₁₅ 0.7 billion. In this case, the IRR for EDF would be reduced by 0.3%.

The project management has set the objective to lift the Unit 1 dome at the end of 2022.

The agreements between EDF and CGN include a capped compensation mechanism between both shareholders in case of cost overruns or delays. Given the expected level of completion costs, this mechanism is applicable and will be triggered when the times comes. EDF’s published IRR takes this compensation mechanism into account⁽³⁾. This arrangement is part of a Shareholders’ Bilateral agreement signed between EDF and CGN in September 2016 and is subject to a confidentiality clause(see section 2.2.4 “Operational Performance”, risk factor 4A Management of large and complex industrial projects including EPR”).

Progress of the project

Despite the impact of the Covid-19 pandemic, major progress has been made in2020 with the overarching priority to protect the construction critical path plan. In particular, the project has achieved 4 important goals set for 2020:

• first safety related pipework of Unit 1
• J-0 milestone completed for Unit 2, i.e. the completion of the Nuclear Island common raft, in line with initial target date set in 2016;
• manufacturing of feed water tank completed for the secondary circuit of Unit 1;
• finalization of design for internal structures of the Reactor building of Unit 1.

Other major progress has been made on Unit 1. In particular, the 3.5km intake tunnel boring completion and the liner ring 1 successful lift into position in the Reactor building.

On Unit 2, significant progress was also achieved. Works on Unit 2 are carried out circa 12 months after Unit 1.

The UK EPR Design Centre opened in 2020 in Bristol to support the HPC project as well as the development of Sizewell C project (see below “Sizewell C”).

At the end of 2020, the costs to date excluding interim interest for the project as a whole⁽⁵⁾ stood at £12.1 billion (at nominal values), or £11.1 billion at real £2015value. The interim interests stand at €518 million.

Exchanges with the UK office for nuclear safety and regulation (ONR)

The ONR has been regularly informed of the management of the Covid-19 situation and the mitigation plans implemented. Next ONR Hold Point will be the start of bulkMEH erection. In addition, agreement from ONR will be needed for the dispatch of the first components coming from Framatome and for the delivery of fuel on site.

Contract for Difference (CfD)⁽⁶⁾

The HPC project company, NNB Generation company (HPC) Limited and theDepartment of Energy and Climate Change (DECC) have agreed, on October 2015, on the full terms of the CfD for HPC, which was approved by the EuropeanCommission in October 2014, ruling that the terms complied with EU state aid rules.The Commission’s decision has been challenged by Austria, which sought the annulment of that decision before the General Court of the European Union, which dismissed its action by a judgment of 12 July 2018. On 22 September 2020, theEuropean Court of Justice rejected Austria’s appeal and confirmed the Commission’s decision approving United Kingdom aid for HPC nuclear power station.

The CfD was signed on 29 September 2016 alongside all the other contracts with theUK Government and it is a contract to provide security in respect of revenues generated from electricity produced and sold by HPC through compensation based on the difference between the Strike Price and the market price, for a period of 35 years from commissioning of Unit 2.

From the plant’s start date, if the reference price at which the generator sells electricity on the market is lower than the strike price set under the terms of the contract, the generator will receive an additional payment. If the reference price is higher than the strike price, the generator will be liable for the difference.

The key elements of the Contract for Difference are:

• the strike price for HPC is set at £₂₀₁₂ 92.50/MWh; strike price will be reduced to£₂₀₁₂ 89.50/MWh if a final investment decision is taken on Sizewell C project, with further compensation from Sizewell C to HPC, in order to share UK first of a kind costs of EPR across both projects;
• the strike price is fully indexed to UK inflation through the Consumer Price Index(CPI);
• the payment term is 35 years; in case of a delay of Unit 1 leading to its commercial commissioning after 1 May 2029 or a delay of unit 2 leading to its commercial commissioning after 31 October 2029, the corresponding 35-year payment term would be decreased commensurately with the deadline overrun.Moreover, any delay in the commercial commissioning of Unit 1 exceeding 4 years after the deadline specified by the agreement for unit 2 (i.e. beyond 31 October2033, unless this date is postponed pursuant to the terms of the agreement) authorises (but does not oblige) the UK Government to terminate the agreement.In view of the pandemic, HPC has made a request to the LCCC ⁽⁷⁾ to extend theCOD windows, citing force majeure as allowed by the CfD. The investigation is underway;
• the project is protected against certain unfavourable regulatory and legislative changes; provision has also been made to review the costs (up or down depending on the assumptions used) in the fifteenth and twenty fifth years, and to review certain conditions for the costs corresponding to decommissioning and waste management operations (Funding Decommissioning Programme); no protection exists against Brexit risks, but the project has not, to date, identified any significant impacts.

There is no explicit volume guarantee in the CfD, nor is there a ceiling; however, the contract is protected against change in law risk and any curtailment on the export of electricity so that the project is put back in the same position it would have been had the change in law or curtailment event not occurred.

HPC project is protected against power market price changes during the CfD period. Post Cfd, a change in the price of electricity of £₂₀₁₅ 10/Mwh has an impact of 0.1%on the IRR.