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EU court rules UK aid to Hinkley Point C nuclear plant is legal

London — Planned UK aid to the 3.2 GW Hinkley Point C nuclear power project is legal, the EU General Court in Luxembourg ruled Thursday, dismissing Austria's attempt to have the European Commission's decision to approve the aid annulled.

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The ruling should reassure French project developer EDF that its agreement with the UK government on guaranteed strike prices of GBP92.50/MWh (in 2012 prices) for the power generated for 35 years, compensation for any early shutdown and a government credit guarantee for bonds to finance the project will all continue as planned.

The estimated GBP18 billion ($24 billion) Hinkley Point C project in Somerset, southwest England, is expected to come online in 2024 and planned to last 60 years, generating about 7% of UK electricity.

It is set to be the first nuclear power plant built in the UK since Sizewell B in Suffolk, eastern England, came online in 1995.

The court found that the EC was right to conclude in its October 2014 approval decision that the lack of market-based financial instruments for EDF to hedge the project risks constituted a market failure.

This meant the UK government was justified in offering state aid to ensure new nuclear generating capacity came online in good time.

The court also ruled that the EC was right to find it "unrealistic" that a comparable amount of wind power could be built within the same time as an alternative, given wind's intermittent nature, and so the planned aid is proportional.

The court dismissed all of Austria's pleas against the EC's decision, including that the UK should have launched a tendering process.

The court found that the planned aid is a "mere subsidy" and does "not constitute a public contract or a concession." The aid does not allow the UK to require the project developer "either to build Hinkley Point C or to supply electricity."

The court reaffirmed that EU countries have the right to choose their energy mix, and to decide that developing nuclear energy is a public interest objective, even if not all EU countries agree with that.

Austria, which is famously anti-nuclear, now has two months to appeal, but only if it can find evidence of mistakes in the court's process.

Only Luxembourg supported Austria in the case, while the Czech Republic, France, Hungary, Poland, Romania, Slovakia and the UK all intervened to support the EC.

EDF owns 66.5% of the Hinkley Point C project, while China's CGN owns 33.5%. --Siobhan Hall, siobhan.hall@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com