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The European Commission (EC) on 11 March approved the partnership between EDF and China General Nuclear (CGN) for the development, construction and operation of three new nuclear plants in the UK. The EC said the partnership complies with EU merger regulations. Under the Strategic Investment Agreement signed last October, CGN agreed to take a 33.5% stake in the Hinkley Point C project in Somerset, as well as for the joint development of new NPPs at Sizewell in Suffolk and Bradwell in Essex. The Hinkley Point C and Sizewell C plants will be based on France's EPR reactor technology, while the new plant at Bradwell will feature CGN's Hualong One design. The partnership is to be implemented through three joint ventures respectively responsible for development, construction and operation of the plants.

The EC noted that competition in the UK's wholesale electricity market "will not be hindered by the transaction given the moderate market share of EDF, the very limited market shares of CGN in this market and the presence of other competitors". It also looked at the "vertical link" between CGN's reactor supply activities and the future joint ventures' activities in generation and wholesale supply of electricity. The EC said was not concerned about this or the fact EDF owns other sites considered suitable for new NPPs, "in view of the presence of other players on these markets".

"As regards the other nuclear-related markets where CGN and other Chinese State-owned companies are active (such as instrumentation and control systems, nuclear construction services, etc) and which are upstream to the joint ventures' activities, the commission found that the parties would not have the ability to shut competitors out of these markets," it said. "The transaction only concerns the UK market and CGN and other Chinese State-owned companies are barely active in these markets in the European Economic Area and have moderate market shares globally."

EDF Energy welcomed the decision as "a positive step for the Hinkley Point C project", which "shows that the robust agreements underpinning the project continue to pass independent scrutiny". Despite growing concern about the financial viability of the Hinkley project and EDF's ability to support the project, the UK and French governments on 3 March "welcomed the major progress made in recent months with a view to confirming the project to build two EPR reactors on the Hinkley Point site". The statement noted the "significant milestones" of the signing of the framework agreement between EDF and CGN and the state aid approval by the EC of the methodology underpinning the waste transfer contract between EDF Energy and the UK government.

Meanwhile, EDF still has made no final investment decision on Hinkley, with French unions continuing to object to the project. The Cour des Comptes (public auditor) said on 11 March that the project is potentially risky for EDF, whose foreign investments in recent years have proved disappointing. In a report on EDF's international strategy, it said EDF and its 85% state shareholding should take a close look at the risks associated with the project. The report said EDF's cashflow and high debt limit its capacity to invest abroad, especially given the huge sums needed to upgrade its ageing French nuclear plants. The company faces an estimated €55bn bill in the coming decade just to increase the lifespan of the country's 58 nuclear power stations from their current 40 years to 50.

The situation was not helped by the resignation of EDF Finance Director Thomas Piquemal, reportedly because he believed pursuing the Hinkley project could threaten the group's finances. However, EDF CEO Jean-Bernard Levy said he regretted the resignation and wants to reach a final decision soon on investing in Hinkley. He immediately appointed Xavier Girre as chief financial officer on a provisional basis. Levy said: "With the support of its shareholder, the state, EDF can confirm that it is looking to invest in two reactors at Hinkley Point under the best possible financial conditions for the group, with the objective of making a final investment decision in the near future."

In another development, former Hinkley Point C project director Chris Bakken who left the company earlier this year to join US Entergy Corporation, refuted reports in The Times newspaper that he left EDF Energy because he did not have confidence in the project. In a letter to the newspaper, he said he had moved back to the US for family reasons and that the economics of the Hinkley project had stood up to "repeated scrutiny". He said Hinkley will be competitive with all other forms of future electricity generation and its power will be available "when the wind doesn't blow and the sun doesn't shine".

Date: Monday, 14 March 2016
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