EDF Energy Refutes Hinkley Point ‘Return On Investment’ Claims

Posted by NucNet on 18 March 2014 in NucNet

EDF Energy has responded to a report by a UK think-tank by saying assumptions about financing and potential equity returns for investors in the Hinkley Point C nuclear project are “not correct” and were not provided or validated by EDF Energy.

The Carbon Connect report, released earlier today, said returns for EDF Energy and other investors in the UK’s first new nuclear plant in two decades could be much higher than for other projects.

Investors could earn returns of up to 21 percent over the lifetime of the project, Carbon Connect analysts said in the report, the preparation of which was overseen by former energy minister Charles Hendry.

EDF Energy said in a statement released this afternoon that the report endorses nuclear’s role in the UK’s energy mix and highlights the benefits of the strong cross-party consensus behind its development and construction. The report also stresses the importance of building skills and expertise for large infrastructure projects, including new nuclear, and outlines the progress in increasing the UK’s expertise in nuclear research and development, EDF Energy said.

But EDF Energy said the report makes a number of assumptions about financing and equity returns for the Hinkley Point C project. These detailed assumptions are not correct and were neither provided nor validated by EDF Energy, the company said.

“As reported last October, target project returns are 10 percent and, with borrowing, equity investors may achieve closer to 15 percent,” EDF Energy said.

“These investors will take the risk of delivering the project on budget and also face risks on the performance of the station when built. There are in- built mechanisms to reduce the customer price if higher returns prove achievable and to share benefits from any gains in construction costs.”

EDF Energy said project costs for Hinkley Point C have been built up from competitive tendering “wherever possible” and, as the government has made clear, the price for electricity is competitive with other forms of low carbon energy.

EDF Energy said it agreed with Carbon Connect that the European Commission state aid process is an important opportunity for further scrutiny of the deal. The process will show that the deal is “fair and balanced” for consumers and investors.

In December 2013, the EC launched an investigation to examine whether UK plans to subsidise Hinkley Point C are in line with EU state aid rules.

One of the EC’s concerns is that EDF Energy will receive a steady income for electricity produced by the station without taking into account the volatility of electricity prices.