Delays to Hinkley Point C nuclear power plant likely as contracts are confirmed

Preferred bidders for the new Hinkley C nuclear project from EDF have been confirmed with a total contracts value of £1.3bn. The current estimate of the value of construction contracts to go to UK contractors is now put at more than 60%, against an initial target of 57%. The overall project cost is currently put at around £25bn. The key preferred bidders include:

• Balfour Beatty Bailey (Joint Venture) comprising of Balfour Beatty, London and NG Bailey, Ilkley, Yorkshire – electrical cabling and equipment installation;
• Cavendish Boccard Nuclear(Joint Venture) comprising of Cavendish Nuclear, Bristol and Boccard, Lyon, France – mechanical pipework and equipment installation;
• ACTAN (Joint Venture) comprising of Doosan Babcock, Renfrew and Crawley, with Axima Concept and Tunzini Nucleaire, both of Paris, France – heating, ventilation and air conditioning;
• Laing O’Rourke, Dartford – construction of workers’ campus accommodation;
• ABB UK,Stone, Staffordshire – power transmission;
• Premier Interlink WACO UK Ltd, East Yorkshire – construction of temporary buildings;
• Weir, East Kilbride – large pumps for cooling water; and
• SPX ClydeUnion Pumps– main pumps for feedwater system and cooling water system.

Confirmed project management contracts have been agreed with the following companies; contract values are to be determined for services over the construction duration:

• KBR, Greenford and Leatherhead – project management of site operations and equipment contract management;
• Jacobs, Reading – project management of building and civil work;
• Gleeds, London and Gloucester – contract management services;
• Faithful+Gould, Bristol – contract management services;
• Turner and Townsend, Leeds – project controls and project management; and
• Mace, London – contract management services.

However, Hinkley Point, with its nameplate capacity of 3,200MW, is under criticism as the Government prepares to give the final say to the plans.  The plant will cost as much as the combined bill for Crossrail, the London 2012 Olympics and the Terminal 2 at Heathrow and is due to open in 2023.  The plant will be built by the state-backed French firm EDF and will be part-financed by investment from China.

Peter Atherton, a respected energy analyst has said that for the same price the UK could build 50,000MW of new, high efficiency, gas fired capacity (effectively the whole thermal power generation fleet in the UK).

This criticism has strengthened after HSBC produced a detailed report by their energy analysts.  The report described eight key challenges. These include:

• declining demand for power in the UK;
• a three-fold jump in the UK's interconnection capacity with continental Europe by 2022, this will lead to a massive increase in the Country's ability to import cheaper supplies; and
• there have been a number of problems in Finland, France and China for EDF's European Pressurised Reactor model, which to the same type as planned for Hinkley.

HSBC analysts have pointed out that the wholesale power prices have fallen 16% since November 2011 when the Government agreed a 'strike price' for Hinkley Point's output.

Adding to the building pressure, Austria has recently filed a legal challenge at the European court of justice against EU-granted state subsidies for the new nuclear power plant. “Subsidies are there to support modern technologies that lie in the general interest of all EU member states. This is not the case with nuclear power,” the Austrian Chancellor, Werner Faymann, said. The country argues that the Hinkley Point C project is in breach of European law and risks distorting the energy market.

The announcement came days after an alliance of ten German and Austrian energy companies filed a legal challenge at the ECJ against Hinkley Point.

“We are confident that the European commission’s state aid decision on Hinkley Point C is legally robust,” a spokeswoman for DECC responded.  Either way, the challenge could delay the project by years rather than months.

For more information, help or advice please contact Andrew Davison on 0191 211 7950.