Universal Registration Document 2021

1.4.5.1.2.5 Nuclear New Build business

Following the final investment decision (FID) made by EDF’s Board of Directors on 28 July 2016, EDF and China General Nuclear Power Corporation (CGN) signed contracts for the construction and operation of two EPR reactors on Hinkley Point site in Somerset (“Hinkley Point C” or “HPC” project).

At the same time, agreements were signed for the development in the UK of two nuclear power plants at Sizewell in Suffolk (“Sizewell C” project, based on EPR technology) and Bradwell in Essex (“Bradwell B” project, based on UK HPR1000 technology).

Hinkley Point C (HPC)

EDF’s share in HPC is 66.5%, with CGN owning the remaining 33.5%.

As with any project of this scope, the project presents important risks in terms of schedule and budget overruns at completion of the project. These risks are detailed in section 2.2.4 “Operational performance related risks– 4A – Management of large and complex industrial projects (including EPR)”.

Management of the Covid pandemic

Since the beginning of the pandemic, the project has taken extensive measures to guarantee the safety of workers on site and in its offices. These measures are being continuously adapted and evolve to apply best practices and to be able to keep the number of infections as low as possible. From July 2021, measures on site have been eased in line with Government guidance, allowing the project to increase capacity on site, with some prevention measures remaining in place.

Thanks to the approach adopted, the site has remained open and running since the beginning of the pandemic. However, works performed on-site and off-site have remained affected by Covid in 2021. In particular, social distancing measures prevented an increase to the number of workers on site as planned during part of the year and productivity has been impacted. The number of people working on site at peak has increased from c. 5,000 in January 2021 to c. 7,400 by the end of 2021.

Progress of the project

• On Unit 1, the 5m and 5.15m slabs in the Reactor Building have been completed, and in the conventional island, the 2,500 m³ concrete table upon which the turbine will sit is complete.
• The 1.8km Outfall tunnel drive is completed and works have started on the second intake tunnel. The manufacturing of the 6 intake and outfall heads is complete.
• Civils handed over the first room to On Unit 2, the first liner ring has been lifted into position into the   reactor   building   in   November   2021, 11 months after the same operation on the first reactor.
• Manufacturing of key equipment is progressing. For instance, the polar crane quadrilateral beam has been completed and the first low pressure rotor, measuring 20 metres long, has been manufactured.

Financing of the project

• EDF has taken note of the UK Government requirement not to have the control of HPC sold down during the construction period without the prior approval of the  UK Gouvernment.
• The agreements between EDF and CGN include a compensation mechanism between both shareholders in case of overrun of the initial budget or delays. This mechanism is applicable and will be triggered when the time These arrangements are 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 related risks”, risk factor 4A “Management of large and complex industrial projects (including EPR)”).
• As the project’s total financing needs exceed the contractual commitment of the shareholders (committed equity), shareholders will be asked to provide additional equity (voluntary equity) with an end date, estimated to date, at the end of 2023. This could lead the Group to increase its contribution to the financing of the project and to increase its stake (currently 66.5%) if its partner decided not to contribute to these additional equity commitments.

Project Costs and Timeline

The project’s targets in terms of schedule and cost at completion were updated on 27 January 2021 on the following basis ⁽¹⁾:

• the start of electricity generation from Unit 1 has been set at June 2026, compared to end-2025 as initially announced in 2016;
• the project completion   costs   are   estimated   in   a   range   of   £₂₀₁₅22   to

£₂₀₁₅23 billion ⁽²⁾ corresponding to £26 to 27 billion in nominal ⁽³⁾;

• the risk of COD delay of Units 1 and 2 is estimated respectively at 15 and 9 months. The probability of realisation of this risk is high;

The risks on the schedule and cost at completion targets have increased in 2021 due to continuing impact of Covid ⁽⁴⁾, lower than expected civil performance, tensions in global building materials markets and Brexit impacts. In addition, progress on offshore marine works has been slowed down due to permit delays, with an ongoing judicial review.

Plans are being developed to mitigate the delays and actions are in place to drive civil performance.

At the end of 2021, the actual costs excluding interim interest for the project as a whole ⁽⁵⁾ stood at £15.3 billion (at nominal values), or £₂₀₁₅13.6 billion. The interim interests stand at €835 million.

Due to the difficulties encountered by the project, notably on civil performance and marine works, and the increase in risks such as the Ukrainian conflict, Brexit, COVID, supply chain disruption and inflation, a new comprehensive review to update the costs and schedule estimates announced in January 2021⁽⁶⁾ is underway and is expected to be finalised by summer 2022. See also in Chapter 2, Risk 4A "Hinkley Point C - EPR (UK)".

Exchanges with the UK Office for Nuclear regulation (ONR)

ONR has been regularly informed of the management of the Covid-19 situation and the mitigation plans implemented. ONR confirmed that the Covid control measures were in place and in line with Public Health England guidance.

ONR approved commencement of the bulk MEH erection in November 2021.

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) ⁽⁷⁾

The HPC project company, NNB Generation Company (HPC) Limited and the Department 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 European Commission 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, the European 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 the UK 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.

(1) See EDF’s Press release of 27 January 2021 “Hinkley Point C project update”.
(2) Costs net of operational action plans, in 2015 sterling, excluding interim interest and at a reference exchange rate for the project of £1 = €1.23. Costs calculated on 27 January 2021 by deflating estimated
costs in nominal terms using the British Construction OPI for All New Work index.
(3) Costs calculated on the basis of a 2% inflation assumption for the construction period.
(4) The schedule announced in January 2021 assumed the ability to begin a ramp up back to normal site conditions from the second quarter of 2021.
(5) Costs at the project’s boundaries which is consistent with the Project completion cost.
(6) See EDF's press release on 27 January 2021 "Hinkley Point C project update".
(7) Terms of the contract are available on the UK government website: https://www.gov.uk/government/publications/hinkley-point-c-documents.