EDF in talks with UK government over backing for new nuclear plants

The world's biggest operator of nuclear reactors is in early stage talks with the UK Treasury to underwrite part of the financing needed for its Hinkley Point reactor, in Somerset in the UK, which was expected to cost about £7 billion.

EDF hopes that government guarantees would persuade some of the world's largest pension funds to raise the money to help create the next generation of nuclear reactors in Britain.

Any agreement by the UK would be politically controversial in view of the government having clearly stated it would not subsidise the generators. However, last summer the Treasury launched a £40 billion UK Guarantees Scheme aimed at underwriting certain major infrastructure projects to attract private investment in them.

EDF said yesterday that it was aware of the scheme and "we are examining the applicability and the scope of the scheme as any other investor that potentially meets the qualifying criteria will be".

EDF is under pressure to cut the risk in the project following Centrica declining to exercise an option to take a 20-per cent stake in the project last week. Centrica is also setting up a reactor in Sizewell, Suffolk, as well as one in Hinkley Point.

Any agreement about using the Guarantee Scheme to help guarantee part of the project cost would only happen after EDF and the government had agreed on a price for the power that would be generated at the new plants.

Meanwhile, The Times reported the stand-off between the Treasury and EDF Energy was threatening to pull the plug on the French state-controlled company's £14 billion nuclear reactor project in Somerset and to wreck the UK's new-build programme.

According to the newspaper, talks had broken down over the level of subsidy - provided by levies on consumers' energy bills - awarded to EDF Energy in return for building Britain's first reactors for decades.