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UK government 'on verge of Hinkley Point C decision': Business Secretary Clark

A government decision on whether to allow EDF and CGN to build the controversial and much-delayed Hinkley Point C nuclear power plant on Britain's southwest coast will be taken "very shortly", UK Business Secretary Greg Clark told Parliament Tuesday.

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He said nuclear was a vital part of the UK's generation mix.

Television outlet ITV reported that UK Prime Minister Theresa May was poised to approve the 3.2 GW, GBP18 billion ($23.8 billion) project this week.

The Telegraph newspaper, however, reported a Downing Street source insisting that no decision had been taken, and that May's timetable remained unchanged, with a Hinkley decision due by the end of September.

Article Continues below...

The BBC said in an opinion piece a go-ahead seemed probable following May's visit to China, given the boost to UK steel and other support services, profit restrictions in the Hinkley Contract for Difference and the absence of any anti-Hinkley briefing from government sources in recent days.

City analysts, who are generally opposed to the deal on cost grounds, are less sure.

"Our expectation of the deal being approved has now dropped to just over 50% given that it will essentially be Theresa May's decision, making it extremely difficult to call," BNP Paribas analyst James Sparrow said Wednesday.

"It's also worth bearing in mind that an approval could well come with restrictions around future Chinese investment in UK nuclear that could still effectively kill the deal," he said.

This was a reference to reports that May has security concerns around Chinese involvement in UK nuclear, and that if CGN's plans are thwarted it will withdraw, leaving EDF exposed to unacceptable construction cost risks.

In October 2015 EDF and China General Nuclear Power Corporation signed a Strategic Investment Agreement for construction and operation of two French EPR reactors at Hinkley Point C, with EDF taking a 66.5% share and CGN 33.5%.

Meanwhile EDF and CGN agreed Heads of Terms on a wider UK partnership for the joint development of nuclear power stations at Sizewell in Suffolk and Bradwell in Essex.

At Sizewell C the plan is to build two more EPR reactors, EDF taking an 80% share and CGN 20%.

At Bradwell B, meanwhile, the roles are to be reversed, with CGN taking a 66.5% and EDF 33.5% in a joint venture company to get the Chinese-designed Hualong HPR1000 reactor through the UK's Generic Design Assessment process ahead of a construction decision.

A review of the government's 35-year, GBP92.50/MWh Contract for Difference for Hinkley Point C was announced July 28 by Clark, hours after EDF's board confirmed a final investment decision to proceed.

--Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com
--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com