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EDF's Hinkley Point nuclear plant runs further over budget, risks delays

The cost of completing the U.K.'s most high-profile new nuclear plant will exceed initial expectations by up to £2.9 billion, surprising even those that had already factored in a cost hike. Hinkley Point C in Somerset will now cost as much as £22.5 billion, operator Electricité de France SA, or EDF, announced on Sept. 25.

The French utility said Hinkley will represent an outlay of between £21.5 billion and £22.5 billion, which is between £1.9 billion and £2.9 billion more than previously forecast. While investors were anticipating costs to rise, Barclays said in an analyst note that the increase is "significantly larger than expected and should be taken negatively."

EDF shareholders also reacted negatively to the news, with the French utility's share price dropping by more than 6% following the announcement.

EDF, which owns the planned 3.2-GW project together with China General Nuclear Power Corp., attributed the increase to challenging ground conditions, revised action plan targets and the "extra costs needed to implement the completed functional design."

Power prices will not rise as a result, EDF said, as it has already agreed with the U.K. government a contract for difference at £92.50/MWh for 35 years. This makes U.K. nuclear power more than twice as expensive as the next wave of offshore wind farms, which fetched record low prices in the country's latest renewable power auction last week.

EDF, the only developer left with plans for new nuclear capacity in the U.K., still expects to begin generating power from the first unit at Hinkley by the end of 2025. It did, however, state that the risk of units 1 and 2 going online 15 and nine months late, respectively, had gone up.

In addition to Hinkley Point, the utility is also pushing to start construction of its proposed 3.2-GW Sizewell C nuclear plant in Suffolk, England, in late 2021. The plant is pitched as a close copy of Hinkley Point. EDF is also developing a joint proposal to build the Bradwell B nuclear plant in Essex with China General Nuclear Power.

The U.K. has laid out an ambitious plan for cutting emissions in the power generation sector, including a phaseout of coal by 2025. Therefore, even amid news of higher cost and delays, nuclear power is still expected to play a significant role in ensuring power supply, particularly when renewable power flows are patchy.

European Pressurized Reactor difficulties

EDF is involved in two other European nuclear projects using the same technology as Hinkley Point — called European Pressurized Reactors — in Finland and France, but neither are going to plan.

Finnish utility Teollisuuden Voima Oyj's Olkiluoto project in southwest Finland is already more than a decade behind schedule. The plant is being built by Framatome, an engineering and construction firm majority-owned by EDF. Construction started in 2005 and cost estimates have since increased.

Meanwhile, the cost and start-up schedule of EDF's Flamanville plant in France are being reviewed after the country's nuclear watchdog ASN said on June 19 that EDF would have to repair faulty equipment at the plant. The commissioning date has since been pushed back until late 2022 at the earliest. Costs for the project are expected to increase, Barclays said in its note.

In addition to the challenging future projects, EDF had on Sept. 10 announced that Framatome had experienced technical issues with some nuclear reactor components. The defect was found in both in-service components and components that had not yet been installed.