UK unveils GBP 10 billion of financial guarantees for Hinkley Point nuclear reactor

02/07/2013 00:00

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The UK government has announced its initiative to encourage investment in nuclear power by offering 10 billion pounds (GBP) (15.2 billion US dollars, 11.6 billion euros) of financial guarantees to French generator EDF for the construction of a new nuclear plant at Hinkley Point.

The decision came as UK is threaten by power blackouts within the next two years as the UK has failed to build sufficient new wind farms and nuclear powers stations, meanwhile companies are closing gas and coal fired plants because they are currently not profitable to keep them open. The support, which was offered by the Treasury, represents commercial loan, rather than a subsidy. The plans set out by the chief secretary to the Treasury, Danny Alexander, represents the centrepiece of a £100bn package of infrastructure investment covering 2015-20, including new roads, schools and affordable homes. Loan guarantees are primordial for EDF to reduce the risk of building and financing the scheduled Hinkley Point C reactors. The guarantee, which acts as an insurance policy for providers of funding that they will get paid, will reduce the cost of debt needed to fund the project by allowing EDF to take loans at rates close to what the government pays. According to the Ofgem’s declarations -the British energy regulator, there is a probability of significant power shortages in the UK, which would increase to about once in 12 years in 2015, from once in 47 years now, following the closure of power plants. About a fifth of UK's power generation capacity is set to shut down in the next ten years. Britain hasn’t constructed nuclear power plants since 1995 and is looking now for 110 billion pounds of investment in its aging power generation and electric grid network. Hinkley Point C would be the first new nuclear power plant in the UK since 1995. However, EDF Energy warned last month that before construction begins agreement is needed with the government on a contract for electricity the plant would produce.

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