EDF UK: returns on nuclear agreement likely to be much higher than usual

18/03/2014 10:32 Electricity Market

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The EDF’s first nuclear reactor in Britain might generate for the French utility and the investors two-decade profits, supported by government, expected to be much higher than returns from other projects, as stated in a report.

EDF intends to start operations at the first new nuclear plant at the Hinkley Point C located in southern England in 2023. A loan and a fixed minimum price for the electricity generated during 35 years will be offered by the British government to back the projects. An equity return of about 19 to 21% is expected to be earned by the investors over the total duration of the project, according to Carbon Connect analysts, or significantly higher than anticipated returns on Private Finance Initiative (PFI) projects and regulated power network capital. Normally, the returns for PFI projects are between 12 and 15 %, while those on regulated networks are between 8 and 10%. Britain relies on the building of the new nuclear plants since it aims to substitute old and polluting power stations that are shutting down. The European Commission is examining if Britain's government assistance for nuclear is in conformity with European Union state support regulations. Besides EDF, Hinkley Point investors comprise France's Areva and Chinese state-owned firms CGN and CNNC. By the end of the year, the European Commission will decide if Britain’s state assistance for Hinkley Point will be approved. There are two more investor groups with the intention to construct new nuclear reactors in Britain, of which Japan's Hitachi project to develop five reactors at two locations, and France's GDF Suez and Japanese partner Toshiba plans to establish three new nuclear divisions at a site in northern England.

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