The French government has said it will go ahead with a 4-billion-euro share issue for state-controlled electricity firm EDF. The move will help finance the construction of two controversial nuclear reactors in the UK.
The French state - which holds 85 percent of EDF - said it will buy three billion euros' worth of the newly issued EDF shares sometime this year. The fourth billion will be chipped in by other investors.
EDF's board of directors is expected to give final investment approval this week for the construction of two EPR nuclear reactors at Hinkley Point in southwestern England, home to two old Magnox reactors that are no longer in operation and two AGR gas-cooled reactors whose construction began in 1967 and are still in operation, but whose decommissioning date is currently set for 2023.
EDF had delayed the final investment decision on the new Hinkley Point reactors several times, as it sought other investors to share the costs amid concerns the heavily indebted company will struggle to meet its financial commitments.
Internal skeptics abound
The six labor-union representatives sitting on EDF's 18-member board have repeatedly opposed the project. They wanted to see it delayed by three years to give EDF time to complete the construction of similar reactors in France, Finland and China, which are several years behind schedule.
The company's works council secretary, Jean-Luc Magnaval, told the news agency Reuters that his union had filed a complaint on the matter with a Paris court, which has scheduled a hearing on the case for August 2.
EDF's chief financial officer has resigned over the threat the project represents to the company's finances.
EDF is also planning to speed up renovation of its 58 nuclear reactors in France, a task expected to cost about 51 billion euros.
EDF, which has already spent about 3 billion euros on Hinkley Point C, needs the project "to maintain its know-how and prepare for the retirement and renewal of its aging French and British nuclear fleet," chief executive Jean-Bernard Levy told shareholders on Tuesday. He added that the new capital would also help the bolster the company's credit rating and its ability to refinance its 37.4 billion euro debt.
Sparing no expense
The Hinkley Point project is a joint venture between EDF and China General Nuclear Power Corporation. It's one of the world's most costly nuclear power plant projects.
The most recently projected price tag was a whopping 18 billion pounds ($24 billion, 21.7 billion euros), before Brexit lowered the value of the pound.
However, a complex system of subsidies approved by former UK finance minister, George Osborne, could cost up to 37 billion pounds, according to a recent estimate published by the UK Department of Energy and Climate Change.
(L-R) Nigel Cann, site director of Hinkley Point C; Ed Davey, the then UK Secretary of State for Energy and Climate Change; then-Prime Minister David Cameron; Vincent de Rivaz, ex-Chief Executive of EDF; and Henri Proglio, who was then CEO of EDF, together examine site plans for Hinkley C nuclear power station at Hinkley Point, in a photo from October 2013
The UK's environment secretary, Andrea Leadsom, recently reiterated that the Hinkley Point project will kick-start a "nuclear renaissance" in Britain that would see 18 gigawatts of new capacity added if sites at Sizewell, Bradwell, Moorside, Wylfa and Oldbury are developed along with Hinkley Point C.
Nuclear power accounts for around 16 percent of the UK's energy requirements, which could drop to three per cent in 2030 unless new reactors are built in the meantime, Leadsom said.
EPR reactors are third-generation nuclear reactors which use pressurised water as their cooling fluid. At present, most operating reactors around the world are second-generation reactors; only around a dozen Generation 3 reactors are in operation so far.
A variety of Generation 4 reactor designs, which engineers hope will be more inherently safe and more cost-efficient than previous generations, are in various stages of prototype development, but none are expected to be commercially available before about 2030 or 2040.
By that time, however, renewable energy technologies and battery storage systems may have attained such a low cost that construction of new nuclear power stations may prove a tough sell financially. That's already the case for the Hinkley Point C project and for EDF's other three existing EPR reactor projects around the world, all of which have proven to be far more expensive than optimistic early estimates, and very likely none of which would be getting built had they not been supported by heavy government subsidies.
(With material from AFP and Reuters)