Another “confirmation” was made yesterday that the government plans build the Sizewell C nuclear plant in Suffolk. This is undoubtedly the most famous project in UK infrastructure history. However, the latest update contained a real sign of seriousness: The Chinese are being paid to leave.
China General Nuclear, which was a state-backed company, held a 20% stake and could subscribe to continue its holdings through all funding rounds. This is similar to what it did at Hinkley Point C, Somerset. Sizewell was closed to any Chinese involvement for at most one year.
First, because David Cameron’s misguided “golden age” of friendship with Beijing has ended, Rishi Sunak stated earlier this week. The second reason is that Sizewell’s construction phase would be impeded by the presence of a Chinese company. This could have led to a rise in costs.
In its usual less-than-straightforward way, the government declined to say how much of its £679m fresh funding for Sizewell (giving the UK state a 50% stake now) will be directed at buying out CGN.
If £100m-ish is right, then the negotiating result could be considered reasonable or at most pragmatic. Although we don’t know how much CGN has spent, a 20% stake in an unbuilt Sizewell is clearly of value. CGN needed to be cleared to move beyond the planning stage.
When other investors have pledged the hard equity capital necessary to finance construction, the project will be “confirmed”. This moment is still one year away. The job will likely involve finding £8bn-ish, which would allow for an even larger loan. This is no easy task. The cost of equity as well as the cost of borrowing will determine the value of money for bill-payers.
Sizewell is beginning to appear credible, for better or worse.
