Fears over Suffolk’s new nuclear power station as EDF’s earnings plummet
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French company EDF has reported a sharp drop in UK earnings raising concerns it may consider pulling out of plans to build Sizewell C.
EDF lost 200,000 customers to rival energy firms and reported earnings for its UK business tumbled 16.5% to £691m in the year to December 31, as it blamed a downturn in nuclear power generation and “lower realised net prices” for the falls.
EDF is currently carrying out its second public consultation over plans to build Sizewell C – and has denied the project is in danger.
News of EDF’s UK earnings downturn has raised the spectre that the firm could go the way of Hitachi which last month shelved plans to build a £16bn nuclear power station – Wylfa power station on Anglesey – due to financial woes.
Two months before that, another Japanese company Toshiba, scrapped its plans for a nuclear plant in Cumbria after failing to find a buyer for the ailing project.
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Prof Neil Hyatt, professor of nuclear materials chemistry at the University of Sheffield, said the drop in EDF’s UK earnings is a cause for concern.
“The deterioration in EDF’s financial position will make it more difficult to fund the construction of Sizewell C, of the order of £15bn,” he said. “Although this is significantly lower than the £20bn cost of constructing the replica Hinkley Point C plant, as a result of lessons learned and economy of scale, the high up-front capital cost poses a potential existential risk to the financial health of EDF, which must shoulder the full commercial risk.”
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However EDF is in discussions with the government over a financing model which could mean the project is funded by a number of different investors lessening any potential risk.
Prof Hyatt added that if EDF were to pull out of the Sizewell C project, it would leave a “gaping hole” in government policy for affordable, secure and low carbon energy supply.
“Government must act urgently to address this challenge, to enable private and public financing of new nuclear power stations, whilst ensuring affordability for consumers: time is running out, the UK is heading for an energy crunch,” he added.
However, despite its latest financial news, a spokesman for EDF confirmed the company is still “committed to Sizewell C”.
“Sizewell C is making good progress and is currently in stage three consultation where we have already engaged with 5,000 local people,” he said.
And last month, Humphrey Cadoux-Hudson, managing director of the Sizewell C nuclear project, was still optimistic that the project could meet the cost challenge set by government and offer a competitive price for consumers.
“Coal still plays a big part in keeping lights on during winter. It will be gone by 2025. That is why we are moving ahead with investment in low carbon electricity, including at the proposed Sizewell C nuclear power station in Suffolk,” he said.
The new Sizewell plant would be a close replica of the Hinkley Point C power station that EDF is building in Somerset.
Mr Cadoux-Hudson added that with the right timing, EDF could transfer know-how, and the “significant costs” involved in the approval process for designing a new power station would be mainly avoided.
EDF’s building of Hinkley Point C is still going full steam ahead. EDF said that “all key milestones” were reached at the power station, which will supply the UK with electricity to meet 7% of the country’s needs from the end of 2025.
The fall in EDF’s earnings comes despite the firm announcing two substantial price hikes last year, and energy customers on EDF’s standard variable tariff face a 10% price increase from April 1.
For the group as a whole, EDF reported an 11.1% rise in earnings to £13.5bn.