Toshiba UK nuclear deal collapses – will the Chinese get the red carpet?

The collapse of a Japanese-led bid to build a nuclear plant leaves a gaping hole in Britain’s energy provision, this may leave the door open for China to up its stake

The role of China in UK nuclear power generation has potentially become more important, following the decision by Toshiba to pull the plug on building a new reactor in Cumbria, northwest England.

After many months of discussion, Toshiba held a board meeting in Japan on 8 November to discuss the future of NuGen, the company which owns the rights to develop the 3.8GW Moorside nuclear project. The board decided to wind up NuGen.

This decisions has caused a stir in British political circles. Sue Hayman, Labour Member of Parliament (MP) for Workington, and co-chair of the All-Party Parliamentary Group on Nuclear Energy (APPGNE), said that the Toshiba decision was terrible news, not just for Cumbria, but for the UK as a whole, and accused the government of not backing Moorside with the same vigour given to other new nuclear projects across the country. The country needs new nuclear as part of its low carbon energy generation, she added.

Last week, in their role as co-chairs of the (APPGNE), Hayman and fellow West Cumbrian MP Trudy Harrison were in China, meeting with senior representatives of China General Nuclear Power Group (CGN). Hayman said that the talks included exploring whether CGN may be interested in the development of new nuclear power in West Cumbria, in some shape or form.

CGN has already made significant investment into the UK's nuclear sector. It is a minority stake investor in Hinkley Point C nuclear power station, a project that is being led by France's EDF. Hinkley Point is in Somerset, southwest England.

CGN and China National Nuclear Corporation (CNNC) have been jointly promoting the Hua-long Pressurized Reactor 1000, which CGN wants to put into service at the planned Bradwell B nuclear power station.

Long-term industrial partners CGN and EDF Energy are together intending to develop the new nuclear power station at Bradwell-on-Sea, Maldon in Essex. They are currently in the process of carrying out technical assessment work in order to inform their emerging proposals, and will be conducting extensive consultation with various stakeholders – including the local community, local authorities, and statutory consultees – as the plans are progressed.

The collapse of NuGen may persuade the UK government to work more closely with China, especially since Chinese companies often bring their own debt finance as part of the package.

The Moorside project went through a series of ownership changes since it was announced in 2009. A consortium of France's GDF Suez, Iberdrola of Spain and Scottish and Southern Energy (SSE) was originally formed to develop the project.

But in 2011 SSE announced that it was pulling out of the consortium, to focus on renewable green energy projects, and later sold its 25% stake to GDF Suez and Iberdrola.

In 2014 Toshiba entered the NuGen consortium, buying Iberdrola's 50% stake, and a further 10% from GDF Suez. Toshiba outlined its plans for its subsidiary Westinghouse to develop three AP1000 reactors at Moorside with a combined capacity of 3.6GW, with the first unit producing electricity by the end of 2024. In 2015 GDF Suez changed its name to Engie.

In January 2017, NuGen reaffirmed its commitment to Moorside, after Toshiba suffered a 40% drop in its share price in the wake of US subsidiary Westinghouse Electric revealing that it may have overpaid by several billion dollars for another nuclear construction and services business.

Soon after, Westinghouse Electric filed for Chapter 11 bankruptcy protection. At that point Korea Electric Power (Kepco) said it was interested in becoming part of NuGen. Engie subsequently exercised its right to sell its 40% stake in NuGen to Toshiba, leaving Toshiba as sole owner.

In January 2018 Toshiba sold Westinghouse Electric Company to infrastructure investors Brookfield for 3.4 billion pound sterling, but Toshiba said that it was still looking for a solution to move Moorside forward. Local MPs claimed that Toshiba and Kepco effectively reached a deal for the sale of 100% of the company, but that Kepco wanted some assurances from the British government, which were not forthcoming.

Several months ago, NuGen chief executive Tom Samson warned that the wind up of the company remained a very real prospect.

Now that this has happened, the UK government is facing a sizeable shortfall in its future energy generation plans, which is exacerbated by ambitious goals for UK car owners to switch to electric vehicles.

Given the series of problems with the companies involved with Moorside, the UK government may find it simpler to strike a deal with China - which would be done at the highest level of government. This would fit in with China's ambitious plans to sell its own nuclear reactor technology in Europe.

Date

14 Nov 2018

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