China could take key role in UK nuclear infrastructure through Hinkley Point

• EDF in talks with China to share £10bn reactor costs
• French company's debt levels rocket to £30bn
• Security concerns raise possibility of government taking 'golden share' in development

EDF has been holding talks with China about sharing the soaring cost of building £10bn worth of new reactors at Hinkley Point, Somerset.

The move underlines growing pressure on the French company's internal finances and has reignited a fractious debate about Communist state-run businesses playing a critical role in sensitive western energy infrastructure.

The overtures to Beijing's state corporations – as well as approaches to Middle Eastern sovereign wealth funds – come as EDF faces growing investment demands in France and the UK that have sent debt levels rocketing to €39.7bn (£30bn).

"We have always said we were open to the idea of other partners investing in the project. As we approach our final investment decision, it is right to consider funding options including seeking additional partners," said an EDF spokesman.

"Plans to build new reactors are advancing well and have achieved a level of maturity to make it attractive to potential new investors," he added. "However, it is too early to say anything about the outcome [of these talks]."

EDF Energy owns and operates eight of the UK's existing 10 nuclear power stations and has plans to expand two of these sites, Hinkley Point and Sizewell, Suffolk, by building four new nuclear reactors.

The company plans to make a final investment decision on Hinkley Point C by the end of this year but remains upbeat about the scheme, on which it has already spent £1bn.

While EDF would not publicly confirm it, well-placed industry sources say the group, which has a 20% partner in Centrica already, has been in discussions with China's State Nuclear Power Technology Corporation (SNPTC) and China Guangdong Nuclear Power Corporation (CGNPC). These are the rival state-owned companies that have already teamed up with two Western consortiums vying to buy the Horizon Nuclear Power company from RWE and E.ON. Horizon owns sites at Wylfa, on Anglesey, and Oldbury, South Gloucestershire.

SNPTC is in a bidding team with Areva, the French engineering company that is already working with EDF in Somerset, while talks have already been held by Chinese officials with the UK's Department of Energy and Climate Change about independently developing other nuclear sites in Britain such as Hartlepool in the north-east of England.

Mark Pritchard, a Conservative MP and member of the parliamentary joint national security committee, said any Chinese involvement in EDF's new nuclear plans would raise concerns on a number of fronts and could even require a direct UK government involvement through some kind of golden share.

"If there is significant Chinese financing, then the coalition government should consider retaining a controlling stake," he said. "There would also need to be national security safeguards over any Chinese design and build."

"Restrictions should also apply as to the number of Chinese workers who could work on UK-based nuclear projects. Major nuclear infrastructure projects are an opportunity to create tens of thousands of new jobs for UK workers."

Nick Butler, a former energy adviser to Number 10, has earlier raised concerns about Chinese involvement in any potential Horizon bids. In a recent FT blog, he wrote: "They will be inside the system, with access to the intricate architecture of the UK's National Grid and the processes through which electricity supply is controlled, as well as to the UK's nuclear technology."

Meanwhile, EDF last month revealed its debt levels had jumped nearly 20% in the first half of the year, partly because of €10bn in new spending commitments demanded by the French government on local reactors in the aftermath of the Fukushima atomic crisis in March last year.

The energy company – majority owned by the French state – is also facing mounting cost overruns and delays on its planned new reactor scheme at Flamanville in northern France.

A final green light for Hinkley Point C depends on receiving an acceptable "strike price", agreed with the government, that would guarantee future returns.

EDF insists this strike price – seen by critics as unfair subsidy – will be lower than the £140 per megawatt hour that is roughly the current cost of producing offshore wind power.


Terry Macalister

The GuardianTramp

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