UK unveils financial terms it offered Hitachi

17 January 2019

Greg Clark, the UK's secretary of state for Business, Energy and Industrial Strategy (BEIS), today spoke “candidly” about the unprecedented financial terms offered to Hitachi ahead of the company’s decision to suspend its new nuclear power plant project.

How the Wylfa Newydd plant could have looked alongside the existing Wylfa plant (Image: Horizon)

Japan’s Hitachi said it will halt work on its UK subsidiary's plan to build two new nuclear power plants "from the viewpoint of its economic rationality as a private enterprise". It added, however, that "further time is needed to develop a financial structure" for the Horizon project.

Established in 2009 and acquired by Hitachi in November 2012, Horizon Nuclear Power aimed to provide at least 5.4 GWe of new capacity across two sites - Wylfa Newydd, which is on the Isle of Anglesey, and Oldbury-on-Severn, in south Gloucestershire - by deploying Hitachi-GE UK advanced boiling reactors (UK ABWRs).

Hitachi’s decision comes just two months after Japan’s Toshiba Corp announced it was withdrawing from its nuclear new-build project in the UK and winding up NuGeneration, which had planned to build a nuclear power plant of up to 3.8 GWe gross capacity at the Moorside site in West Cumbria, using AP1000 nuclear reactor technology provided by Westinghouse.

Three offers

Clark gave an oral statement to the House of Commons concerning the UK's nuclear future following Hitachi's announcement. The GBP15 billion (USD19.4 billion) Wylfa Newydd plant was expected to be operational by the mid-2020s and create 9000 jobs in the area. Clark described the commercially sensitive details of the negotiations BEIS and Hitachi had held since last June.

Firstly, the government was willing to consider taking a one-third equity stake in the project, alongside investment from Hitachi and government of Japan agencies and other strategic partners. Secondly, the government was willing to consider providing all the required debt financing to complete construction. Thirdly, it agreed to consider providing a Contract for Difference to the project with a strike price expected to be no more GBP75 per megawatt hour.

"I hope the House would agree that this is a significant and generous package of potential support that goes beyond what any government has been willing to consider in the past. Despite this potential investment, and strong support from the government of Japan, Hitachi have reached the view that the project still posed too great a commercial challenge, particularly given their desire to deconsolidate the project from their balance sheet and the likely level of return on their investment."

He added: "The government continues to believe that nuclear has an important role to play, but critically it must represent good value for the taxpayer and the consumer. I believe the package of support that we were prepared to consider was the limit of what could be justified in this instance."

He stressed that Hitachi has made clear that while it is suspending project development at this stage, it wishes to continue discussions with the government on bringing forward new nuclear projects at both Wylfa and Oldbury and it intends to work closely with the company in the weeks and months ahead.

"If new nuclear is to be successful in a more competitive energy market - which I very much believe it can be - it is clear that we need to consider a new approach to financing future projects, including those at Sizewell and Bradwell. As I initially set out in June, we are therefore reviewing the viability of a Regulated Asset Base model and assessing whether it can offer value for money for consumers and taxpayers. I can confirm to the House that we intend to publish our assessment of this method by the summer at the latest," Clark said.

More time needed

Announcing suspension of the project, the Tokyo-headquartered company said today: "Since the acquisition of Horizon Nuclear Power, Hitachi has set the following three points as the main criteria for business continuation and reviewed the Horizon project from the viewpoint of its economic rationality: securing reasonable returns as a private enterprise; realising a financial structure on the premise of making the Horizon project off balance sheet; limiting an investment amount to an acceptable range as a private enterprise.

"Unfortunately, despite the best efforts of everyone involved, the parties have not been able to reach an agreement to the satisfaction of all concerned. As a result, Hitachi has decided to suspend the project at this time from the viewpoint of its economic rationality as a private enterprise, as it is now clear that further time is needed to develop a financial structure for the Horizon Project and the conditions for building and operating the nuclear power stations."

Agneta Rising, director general of World Nuclear Association said: "We urge the UK government to bring forward fresh proposals for a stable financing framework to enable the construction of new UK nuclear projects that will supply electricity competitively."

Researched and written by World Nuclear News