The UK Government has expressed the intention to reach a Final Investment Decision on at least one large-scale nuclear power station this Parliament, i.e., before 24 January 2025, subject to value for money and all relevant approvals. This objective was first set out in the Energy White Paper in 2020 and has since been included in the government’s Net Zero and British Energy Security Strategies.
In January 2022, the UK Government indirectly provided £100 million of government funding to the Sizewell C project development by payment to EDF in exchange for an option over the site land or over EDF’s shares in the project company. This option will remain in place until Final Investment Decision date with the right for the UK Government to exercise the option only triggered before a Final Investment Decision if EDF decides not to proceed with the project.
On 29 November 2022, the UK Government announced its decision to directly invest c. £700m in Sizewell C to support the project’s continued development and to gradually increase its shareholding through 2023 until it reaches parity with EDF as a 50% shareholder, in view of an expected FID in 2024. As at 31 December 2022, the UK Government holds a 32% shareholding in the project, with EDF owning the remaining 68%.
The UK Government’s investment also led to China General Nuclear’s (CGN) exit from the Sizewell C project. CGN held a c.20% shareholding in the project until 28 November 2022 and remains a shareholder in the Hinkley Point C project.
In March 2022, new legislation came into effect (Nuclear Energy (Financing) Act) introducing a Regulated Asset Base (RAB) model as an option to finance future nuclear projects. The RAB model is a tried and tested funding model that has already been used in the UK to finance other major infrastructure such as water, gas and electricity networks. Under this model a company receives a licence from an economic regulator to charge a regulated price in exchange for providing the infrastructure.
The Sizewell C project was designated in November 2022 as eligible to benefit from the RAB model but such a funding model has never been implemented in the UK for a single asset project of this nature and scale.
Under the RAB model, the project would receive an allowed revenue from the start of the construction phase, which would be funded by electricity suppliers being charged the cost of the project as users of the electricity system. The regulator would set an allowed revenue level for the project to recover costs (construction and operation), provide a return on the capital investment, complemented with an incentive regulation framework to deliver the project. The recovery of development costs incurred prior to the FID date via the RAB model remains to be confirmed.
In addition to the RAB, the Sizewell C project would be granted a Government Support Package (GSP) that would protect investors and debt holders from some high-impact risk events. The combination of the RAB and GSP aims to share the project’s construction and operating risks between consumers, taxpayers and investors and to lower the cost of financing.
The terms of the RAB model and GSP for the Sizewell C project are being discussed with the UK Government.
The financing terms of the project are not defined at this stage.
In July 2022, the UK Government approved Development Consent Order (DCO), giving its go ahead to start building the power station. A request for judicial review has been launched and a hearing is scheduled to take place in March 2023.
In July 2022, the Office for Nuclear Regulation (ONR) concluded that the Sizewell C application to be granted a Nuclear Site Licence has met almost all the regulatory requirements set out in regulatory guidance, with a limited number of forward actions to be closed out. The Nuclear Site License is expected to be formally granted at Final Investment Decision date.
The Principal Environmental Permits to operate the future power station have reached a “Minded to Grant” position from the Environment Agency.
At the date of Final Investment Decision, EDF plans to reduce its shareholding in the project to no more than 19.99%, and to deconsolidate the project from the Group’s financial statements (including in the calculation of the economic indebtedness by the rating agencies).
Subject to Final Investment Decision, EDF will supply the UK EPR design, some key nuclear equipment through Framatome, the steam turbines (in the context of GE Steam Power’s buyout by EDF), the fuel assemblies at minimum for the first fuel cycles as well as associated services to the Sizewell C project.
The power plant’s construction remains subject to the Final Investment Decision. EDF and the UK Government are working together to finalise the remaining steps and prepare the project for further investment.
EDF’s ability to make the Final Investment Decision and contribute to the funding of the construction phase depends on the fulfilment of some conditions including:
EDF’s financial commitment to fund the Sizewell project until Final Investment Decision date is subject to an equity cap, without any obligation to fund the project beyond the funding cap. Failure to meet these conditions would result in the Group not making a Final Investment Decision. In particular, an investment decision taken while EDF’s ability to deconsolidate the project is not assured would strongly penalize the Group (see section 2.2.4 “Risks related to operational performance”, risk factor 4A – “Management of large and complex industrial projects (including EPR project)”).
Should EDF decide not to take a Final Investment Decision, the UK Government would have a right to exercise an option over the land or over EDF’s shares in Sizewell C.
EDF and CGN signed agreements alongside the HPC and Sizewell C contracts on 29 September 2016 in order to:
The Generic Design Assessment (GDA) process for the UK HPR1000 reactor technology was successfully completed in February 2022 with the issuance of a Design Acceptance Confirmation (DAC) by the ONR and of a Statement of Design Acceptability (SoDA) by the Environment Agency.
The project has not seen any particular development since the GDA.
The project to build a nuclear power plant based on the UK HPR1000 technology reactor is unlikely to be implemented, mainly related to a lack of political support and local stakeholder support (see section 2.2.4 – risk 4A).
