EDF power price curb could hit UK nuclear reactor plans

Robin Pagnamenta, Energy Editor
Nuclear reactors that are essential for Britain’s future energy needs are in jeopardy, according to analysts, because EDF will not be able to afford to build them.
Pierre Gadonneix, chief executive of EDF, wants electricity prices to be increased by 20 per cent over three to four years to fund investments. Last week, however, the French Government proposed a 2.3 per cent average increase in electricity prices on regulated tariffs over the next three years.
EDF’s four proposed British nuclear reactors, including Hinkley Point, Somerset, where work is due to start in 2013, could become casualties of the decision.
Peter Wirtz, European utilities analyst at West LB in Frankfurt, said: “If EDF cannot finance its investment programme they will have to think about cutting back some of their plans.”
Nick Campbell, an energy analyst at Inenco, said: “This could be extremely detrimental for the future security of UK energy and lead to an increase in wholesale prices. The effect could ripple across the English Channel and lead to a delay or mothballing of EDF’s four proposed UK nuclear reactors.
"If EDF is struggling to cover costs at home, it is unlikely they will have the funds to take on such large-scale projects abroad.”
EDF’s proposed reactors have been seen as crucial to counteract the loss of generation capacity in Britain from 2015 because of the decommissioning of nuclear reactors and coal-fired units due to be retired from service.
The French Government’s pricing proposal to the Commission de Régulation de l’Energie, the French regulator, could be agreed as early as August 15, according to French sources.
EDF, which operates 58 reactors in France, said that it needed to increase prices to finance planned investments of €7.5 billion (£6.4 billion) in 2009, €2.5 billion more than in 2008.
The group has already announced plans to sell €5 billion of assets by the end of 2010 to help to fund the programme.
Sofia Savvantidou, European utilities analyst for Citigroup, said that there were other options open to EDF: “If necessary, they could sell off stakes in their nuclear plants to financial investors or infrastructure funds. It’s not an immediate threat, but obviously if we don’t see an acceleration of the tariff changes then that becomes a problem.”
She said that the 2.3 per cent tariff increase would raise €560 million more for EDF, whereas a 20 per cent tariff increase would be worth up to €5 billion.
A spokeswoman for EDF said that the group’s activities in France were entirely separate from Britain. She said that planned nuclear investments in Britain would be “self-financing” but declined to comment further.