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An important dimension is missing in your update on EDF’s Hinkley Point project. It’s a question of what the latest £18 bn project figure from EDF actually means in relation to the other still much quoted figure of £24.5 bn.

This much higher figure originally came from the Brussels Competition Commission in 2013 and has to be assumed to be an overall project cost. The lower figure has to be assumed to be the accepted build cost for two reactors at £8bn each uprated by £2bn for inflation by EDF CEO J-B Levy in October last year. Mr Osborne’s £2bn support, whatever it is actually for, would seem to slot into the gap between the build figure and the overall project figure, while Energy Minister Rudd’s letter to Parliament citing a £2bn to £19bn risk to the public purse seems to make sense of the project cost being considerably higher than the build cost. It preceded the EDF £18bn figure.

The much higher Brussels’ Commission figure, presumably also in need of uprating for inflation, must have helped initially with justifying the high strike price of £92.50 pmwh. If the lower build cost had been used, this price would have seemed even more generous - or scandalous - than it is.

The difference matters crucially. If the higher figure is a real project cost, it leaves EDF and China’s CGN still short of several £billion, since their public figuring is associated with the new £18bn figure. Mr Osborne’s £2bn won’t bridge that gap. If, on the other hand, the Brussels figure was a sleight of hand, it will hopefully be picked up the European Court of Justice when they examine the challenge from the Austrian government.

A key question is what exactly the strike price aid is for. Maybe even the Commission could come back if EDF have changed any of the project financing terms which were agreed in April last year. If the cost is now only £18bn, there’s a good argument for that.

Critics of the whole project- and I’m one - might quite reasonably think the difference is just an allowance to reflect the utterly predictable cost overrun for EDF’s EPR reactors. Or maybe that’s just an extra problem to add to all the others.

Regan Scott
Great Bealings, Suffolk

Category: Local Letters