China’s CGN Halts Funding for UK’s Hinkley Nuclear Plant

(Bloomberg) -- China General Nuclear Power Corp. has halted funding for the UK’s Hinkley Point C nuclear station in a fresh sign of tension between London and Beijing.

CGN skipped several installments in recent months, according to people familiar with the matter. That means Electricite de France SA, which was building the £32.7 billion ($41 billion) plant with CGN, may have to pay for its completion alone, they said, asking not to be identified discussing private information.

The withdrawal comes after the UK took over CGN’s stake in a similar nuclear project in Sizewell last year amid national security concerns. Back then, the government didn’t rule out intervening in other cases of Chinese involvement in energy supply. CGN’s plan to build another atomic plant in southeast England is also up in the air.  

It’s unclear whether the Hinkley funding halt is temporary or definitive, some of the people said, adding that the project will continue in any event. Representatives for EDF and the UK government declined to comment, and CGN didn’t respond to a request for comment.

EDF had already warned of a “high” probability that CGN would stop funding this quarter as cost overruns reached a threshold that contractually allowed the firm to cease payments. The halt potentially saddles the French state-owned utility with billions of euros of extra expenditure just as it grapples with high debt and soaring investment needs in its domestic market.

Unless EDF finds other investors for Hinkley Point C — a power station with two reactors that will provide electricity for about 6 million homes — the French group’s 66.5% share in the project will progressively rise while CGN’s 33.5% stake will recede.

EDF would consider reducing the price at which it will sell the plant’s power under a so-called contract for difference if the UK government were to help fund the project, one of the people said.

The government has so far shown no interest in participating in financing, and finding new backers may be challenging. While construction passed the halfway point last year, its estimated cost has jumped 80% from the £18 billion envisaged when the contract was signed in 2016. 

EDF initially planned for completion in 2025, but has said the estimated 2027 start date for the first reactor may be postponed by 15 months amid persistent construction challenges and delays caused by the Covid pandemic.

To rein in future spending, EDF has said it will make a final investment decision for the Sizewell power station next year only if it can bring in other investors and trim its own stake to 20%. 

Chief Executive Officer Luc Remont estimates that EDF’s annual investment needs will surge to as much as €25 billion ($27 billion) in the coming years from €16.4 billion in 2022. The utility plans to build at least six new reactors in France. It’s also boosting spending to maintain its aging fleet and upgrade the electricity grid to accommodate more renewables.

The EDF CEO and French authorities have said that the company will need government support to finance the new atomic power stations in France. 

(Updates with UK government stance in eighth paragraph.)

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