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What on earth is going on with Hinkley and UK nuclear?

STOP-PRESS (1) The existence of a ‘poison pill’ clause has broken through the secrecy surrounding the detailed agreement between the UK government and EDF. If political or policy change happens over the 60 year Hinkley lifespan, UK taxpayers would be required to ‘compensate’ EDF for commercial loss to the tune of as much as £22bn. (Guardian 21.03.16). ‘Poison pills’ are normal for inward investors, but this is hardly a ‘normal’ project.

STOP-PRESS (2) Greenpeace have won access to an oral appeal tribunal on a Freedom of Information refusal of key documents about the UK/EDF deal (Guardian 20.3.16).

STOP-PRESS (3) Private Eye (13.03.16) reveals that European ‘rules’ mean that agreed financial aid to Hinkley cannot be triggered until EDF have proved the EPR design by completing the Finnish and France’s own Flamanville EPRs. Both are now scheduled for 2019.

STOP-PRESS (4) EDF have agreed to take on part of the financial risk of construction delays faced by their China partner CGN. If costs overrun by 5bn Euros, EDF will have to meet 80% of this figure.

After another month of new dates, new financing models and new problems, the media are now mainly hostile if not openly deriding the Hinkley deal, and speculation is rife about what might really be happening. The Times leading editorial (3.03.16) dubbed Hinkley a “Nuclear Disaster” and called for its abandonment. What a way to run an energy policy.

So, what is going on? Certainly there are conjuring tricks, charades, blame games and, hard to dispute, uncertainty and blight for communities and businesses affected – not the least, here in Suffolk.

New information: The roller coaster is revealing interesting new information, some of which will hopefully be clearer after the questioning of EDF, the other 2 nuclear companies and experts etc by Parliament’s Select Committee for Climate and Energy on March 23rd (full report next issue).

New information is the revelation from EDF’s CEO JB Levy to Reuters that the design changes to Hinkley are “no more than 20%”. That’s new.

Second, again from French sources, is that at least one of the three or four French government new methods of subsidising EDF with French tax payers money is likely to arouse the active interest of the Competition authorities in Brussels. The design changes raise questions, not the least about whether the design of Hinkley’s EPR was approved before the changes.

Hinkley costs drop from £24.5 bn to £18 bn? Is the new EDF build figure of £18bn (uprated from £16bn when Brussels looked at it) a result of the design changes, and/or financing methods? An Imperial College academic expert asked on Radio 4 about this disparity in costs thought one way to cut costs might be to scrap the second containment vessel. This is claimed to be a key safety feature of the EPR reactor. And EDF have recently talked about a ‘modified EPR’ for France. Is this something entirely separate from Hinkley?

The huge price drop is most likely explained by changed financing methods, but maybe the other changes also contribute. Since EDF can’t get open market finance (equity/loans), it now has only direct China money (£4bn) and it’s own (or French Government capital) and more of this to come, apparently. If an element of the original high strike price was to cover normal outside finance risk, shouldn’t the strike price be revised downwards? If design changes have cut costs, surely the same argument applies. The case for Brussels to revisit the case looks reasonable, and France is certainly aware of this possibility. French commentators have asked whether giving money to EDF by transferring EDF’s existing stake in the French electricity grid to a state bank is a subsidy. The idea is that the state bank would then invest in EFD. Whatever emerges, the magically lower £18 (£16bn) figure looks important. However, STOP PRESS 4 indicates that costs may already been rising beyond the £18bn level.

French auditors downgrade it as well. Meanwhile, the ‘low amber’ credit rating for the project by the UK Public Audit Office (fourth lowest of five rankings) has been echoed by the French national audit bureau, making EDF’s UK plans an open French political issue. The professional engineering unions in EDF have now been joined by the manual workers’ union through their worker share funds in warning that Hinkley puts their whole future at risk.

New dates for old? All this has not (yet) changed any prospective dates. EDF chief JB Levy has not changed the promise that they will be ready to pour concrete in 3 or more years’ time. The next two top EDF meetings (the Board and the Shareholders) may discuss and decide something but who knows? May is now mentioned by the press as a possible decision period. No clues on this here at home, where Chancellor Osborne’s Budget did not say anything about the issue except for his already announced £250m backing of development for new 4th generation mini nukes. His roads announcements didn’t mention the A12 or Sizewell related matters.

Courts and profits. For the moment two further observations:

(1) the competition case at the European Court of Justice is waiting in the queue, and since European Treaty matters are involved, this will be long-winded with first an Advocate General ‘opinion’, and then, most likely, a Court examination afterwards. Second, even with magic money, if EDF can’t afford Hinkley without a huge capital subsidy as well as price subsidy, how on earth can it be credible that they can afford Sizewell?

(2) Along with other big energy companies in Europe, global low energy prices have hit company profits, with, for example, Npower (Germany’s RWE) announcing 2,500 redundancies from its 11,500 UK workforce. The parent company has made losses overall this year. The UK EDF operation was very profitable (£700m net profit last year, sent back to France after a little bit of UK tax). But since Sizewell B and the old EDF nuclear stations cannot cut their costs except marginally (one the economic problems of nuclear stations), even these profits won’t be available for some time. Further, with EDF’s privileged direct nuclear electricity contract with the UK government to supply public buildings – the biggest ever UK electricity supply contact – coming to an end now, their UK profits are likely to dip further. Global investors RCB Capital Markets, via Bloomberg’s financial news service have said EDF is “uninvestable” and needs to be fully re-nationalised if it pursues the Hinkley project.

Meanwhile, Government policy moves Energy Secretary of State Amber Rudd has “reset” - not reviewed - UK energy policy with life extensions for the old AGR nuclear stations and Sizewell B (World Nuclear News 4.2.15). And coal station closures by 2025. And who knows what will happen with the other two nuclear operators’ plans for Anglesey and Sellafield Moorside. It looks as though the whole energy strategy should just go in the bin.

It leaves Suffolk with uncertainty, blight, maybe even big surprises like EDF selling off sites to China, not just Bradwell. As we’ve said for some time, it is all bad news for Suffolk : maybe some of our politicians should start living in the real world and join us saying Sizewell C is just not suitable for Suffolk.

Road campaigners now want rail and sea jetty use. EADT (12.03.16) report that the B1122 Action Group now want a rail loop and a ‘successful’ sea jetty. The story reveals new traffic figures too: EDF say HGV movements could range from 200 to 600 per day, but maybe sometimes up to 900, and 510 small trucks (under 3.5 tons). No car figures though. EDF said its second stage consultation might be in the ‘next few months once a final investment decision has been made’, whatever this might mean.

Wildlife writer’s reminder about European protection laws in AONB. Welcome reflection by EADT wildlife writer John Grant, musing on the EU referendum issue, abut how important Europe has been protecting wildlife in our AONB. (EADT 27.2.16). TASC has been studying these laws and rules very closely as part of its case against more nuclear in Suffolk. Since Sizewell B, nature is weaker, protective laws in part stronger and the big build threat much bigger.

UK Energy Policy is ‘drifting aimlessly” So who said that and where? Well, it was former CBI (industry federation) chief Lord Adair Turner, to the Parliament Select Committee on Climate Change and Energy. MPs on the Committee warned that sudden cuts to renewable energy subsidies are spooking investors and will raise energy bills. These are already £400 a year too high for average families say WHICH (3.03.16). Meanwhile the Lord Adonis Infrastructure Commission reports that better energy management could save the UK £8bn annually.

Global investment boost in clean (renewable) energy. Global investment in 2014 (latest figures) jumped by 16%, a figure which purchased nearly twice the amount of clean power capacity that the same money bought in 2011. That’s real productivity growth. It comes mostly from rapidly falling solar panel costs, solar making up half of total clean investment. China’s investment tops the list at $90bn (32%), then come the USA and Japan. France opened the world’s biggest solar plant with 300MWhr capacity, while German and UK investment was very low at 3%, and mainly in offshore wind capacity.

Japan’s Nuclear Mess: still dangerous after 5 years, courts close re-opened reactors. Shutting its 40 nuclear reactors after the March 11th, 2011 Fukushima disaster, Japan’s investigations of radiation impact on people and wildlife continue, with 1,100 square kilometres of land remaining uninhabitable. Only robots are allowed into the melted down reactors, now facing another 5 years before even protected workers might gain access. The ex Prime Minister says Japan was on a “paper thin margin from disaster”. Two reactors which have been re-started have now been re-closed after re-opening. This month only 2 were operating, although 20 have applied to restart.

Suffolk homeowners air Sizewell C blight issues. At long last, the impact of uncertainty about Sizewell C plans has surfaced. EADT (3.03.16) front-paged ”doubt leaves us in limbo”. Businesses “can’t plan”, there is a “black cloud” on transport issues, there was a “huge impact” during Sizewell B building and “it was very disruptive”. The homeowner bit was not attributed, but it speaks volumes.

US firm exploring small nukes manufacture in UK. Toshiba’s American Westinghouse company, who are nuclear sub engine manufacturers, are looking at opening an SMR (small modular reactor) factory in the UK. Attracted by £250m UK government grant for five years to start SMR research, their existing AP1000 reactor is undergoing UK approval for Sellafield (Moorside).

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