China out of nuclear power plan in weeks: Ministers set to bar Communist state from Sizewell C – and may ask pension funds to cover cost
China’s state-owned energy firm is set to be booted out of Britain’s £20billion Sizewell C nuclear power project ‘within weeks’, insiders say.
Senior industry sources told The Mail on Sunday that Ministers are poised to formally bar any further Chinese involvement in the plant in Suffolk over security concerns.
Losing the investment pledged by China’s General Nuclear Power Group (CGN) would create a multi-billion pound funding hole for Sizewell C, which is 80 per cent owned by France’s EDF.
Change of plan: Losing the investment pledged by China’s General Nuclear Power Group would create a multi-billion pound funding hole for Sizewell C
It is understood the Treasury is examining plans for pension funds to plug the gap. The attraction for asset managers would be steady long-term returns once Sizewell C starts producing electricity.
The decision comes with Britain in an energy crisis caused by soaring gas prices. Energy experts say the chaos has been caused, in part, by unusually light winds and underlines why the UK must build nuclear plants to provide a reliable source of clean energy.
The future of China’s involvement in the Sizewell C plant has been in doubt for some time. This month’s Aukus security pact between Australia, the UK and US – aimed at countering China – is understood to have inflamed tensions further. Relations between Britain and China have soured since 2015, when Beijing committed to funding Sizewell and a proposed plant at Bradwell-on-Sea in Essex.
Security concerns led to a ban on Chinese telecoms firm Huawei, which was followed by the approval of the National Infrastructure and Investment Bill, which aims to scrutinise foreign investment in the UK, notably from China.
Officials are understood to be keen to publish a decision on the future of Sizewell C ahead of next month’s Spending Review and the UN Climate Change Conference in Glasgow in November. Ministers are believed to have become concerned about China’s CGN running its own designed reactor in the UK.
A senior industry source said: ‘The Chinese will not be involved at Sizewell. This is part of a long journey and is politically much bigger than just one plant. Sizewell could prove to be the straw that broke the camel’s back in a trade war which started with Huawei.
‘There is also a question whether China actually want to be involved in this project any more. No one in the CGN management team that was there at the time of the deal being struck is still there – and many believe the UK market is not attractive for the Chinese.’ It is understood that ratings agency Moody’s claimed that pulling out of the UK could be ‘positive’ for CGN’s credit rating.
Exactly how CGN will be frozen out of Sizewell is unclear. CGN has a 20 per cent stake in development of the project and an option to remain once it is built. CGN is also involved in Bradwell where progress is understood to have stalled.
CGN’s involvement in the EDF-led Hinkley Point has complicated the Government’s decision with over half CGN’s likely £8billion total spend on the £22billion project already invested. It is due to be completed in 2026. Sizewell C could generate 3.2 gigawatts of electricity, and provide 7 per cent of the UK’s needs. It is designed to be a copy of Hinkley Point C, reducing design costs.
Treasury officials have studied several options to replace China’s funds in Sizewell C. Sources said the favoured option is a regulated asset base (RAB) model, which has been used in other big infrastructure projects such as the Thames Tideway and requires legislation.
RAB guarantees backers an early return through milestone payments before a plant is operational, reducing the risk. But critics claim the risks of rising costs and delays are moved to the taxpayer. City sources said pension funds and sovereign wealth funds are keen to invest in nuclear to hit environmental, social and governance (ESG) quotas, but debate is raging over whether the energy source will be classed as green. Nuclear’s detractors say it creates hazardous waste and carries safety concerns.
Mike Clancy, leader of the Prospect union, which has 12,000 members in the industry, said: ‘If any investor is going to be ruled out for geopolitical concerns, it’s even more important the RAB is delivered so investors have a clear basis on which they can invest.’ Last week, it emerged that Ministers are in talks with the US nuclear reactor manufacturer Westinghouse over a proposal to build a new plant in Anglesey, North Wales. Separate proposals have been mooted for a series of small modular reactors (SMRs) to complement larger plants, including a programme led by Rolls-Royce.
The Government has committed to making a final investment decision on at least one large nuclear project during this parliament.
A spokeswoman said: ‘CGN is currently a shareholder in Sizewell C up until the point of the Government’s final investment decision. Negotiations are ongoing and no final decision has been taken.’