China's nuclear industry secured its first deal in a developed country on Thursday, after the UK's Hinkley Point nuclear power station secured final approval from the board of France's EDF, the project's key investor.
The 18 billion pound nuclear power plant, to be built by EDF, will get a 33 percent financial investment from China General Nuclear Power Corporation (CGN).
The decision came at a EDF board meeting late on Thursday afternoon. Following the announcement of an agreement, legally binding contracts will be signed and construction work can begin, subject to a final improvement from the UK and Chinese governments. EDF hopes to have more than 2,500 workers on site by next year.
"CGN remains committed to delivering this much needed nuclear capacity with our strategic partners, EDF, and providing the UK with safe, reliable and sustainable energy," said a CGN spokesman who requested anonymity.
"We respect the new (UK) Government's need to familiarize itself with a project as important to the UK's future energy security as Hinkley Point C and we stand ready to help the Government in this respect," said the CGN spokesman.
The Hinkley project marks the Chinese nuclear industry's inaugural investment in a developed country. More significantly, EDF and CGN's cooperation at Hinkley is the first step of a larger package of collaboration between the two companies, which includes EDF's agreement to support CGN's investment at the British nuclear power plant Bradwell at a later stage, for which CGN will be the majority investor and Bradwell will use indigenous Chinese nuclear technology.
Tim Yeo, chairman of pressure group New Nuclear Watch Europe, said the decision is good news for the UK economy, and will create a lot of jobs in the construction sector in the next 5-7 years.
"It will also help the UK secure consistent energy supply. The companies, EDF and CGN, also have good financial prospects through this investment because the energy price the received from the British government is favourable," said Yeo, who is also a former chairman of the UK's energy and climate change committee.
Because nuclear investments are large scale and the time horizon is long, the UK government already struck an agreement with EDF and CGN to fix electricity prices for Hinkley's nuclear power generation at 92.5 pounds per megawatt for the next 35 years, which allows them to ensure profitability.
Yeo added that CGN's involvement in the project as a financial investor is important. In the future, the prospect of CGN's investment in Bradwell is also very positive, because it is likely to reduce cost of nuclear energy, as China has a very big nuclear program and the scale is likely to result in cost reduction.
But critics warn of the project's potential technological challenges and potential escalating costs. The project is set to use the European pressurized reactor (EPR) technology, and Flamanville, a project in France using the same technology, is more than three times over budget and years behind schedule.
France's nuclear safety authority has found weaknesses in the reactor's steel at Flamanville. Finland's Olkiluoto Nuclear Power Plant, which also uses EPR, is now nine years behind schedule and three times over budget.
"Until EDF gets other EPR reactors up and running in Finland and Northern France, it's very difficult not to maintain a healthy scepticism with regards to project delivery - and any escalating costs or overruns would of course eat into profitability," said Andrew Shepherd, senior energy & infrastructure analyst at BMI Research.
Shepherd said it is clear that China wants the deal to go through as it would be a landmark deal for CGN and allow the company to announce itself on the world stage, but cautioned that any delays or cost overruns at Hinkley Point will have important implications for the CGN.
