LONDON – A few years ago the UK agreed to give China a stake in its newest nuclear power plants, believing Beijing would have the nuclear know-how and engineering to replace the country’s aging power plants.
It was a warm moment in Sino-British relations, an agreement signed during a carefully choreographed visit by Chinese President Xi Jinping and then Prime Minister David Cameron to London in 2015.
Six years on, Britain has doubts. The funding of a planned, estimated £ 20 billion ($ 28 billion) power plant overlooking the North Sea, which is necessary to ensure a steady flow of electricity for decades, is unexpectedly in doubt. Part of the problem: attracting investors to a project that is one-fifth owned by China.
Mr. Xi’s authoritarian ambitions and human rights record have shaken relations with Western nations and forced a major re-evaluation of a number of economic deals with the world’s second largest economy.
In the UK, the pushback against nuclear power reflects concerns expressed last year when the UK joined the United States to prohibit Chinese telecommunications equipment maker Huawei from using high-speed WiFi networks for security reasons.
The 2015 nuclear deal even provides for China as the majority owner of a planned new power plant of its own design at a location around 80 kilometers from London. Although this project runs through regulatory channels, it is expected to meet strong opposition from legislators.
“We cannot allow the technological heart of our energy system to be exposed to the risk of disruption by states that do not share our values,” said Tom Tugendhat, a member of the Conservative Party led by Prime Minister Boris Johnson and chairman of the Foreign Affairs Committee Houses of Parliament.
China has ambitions to become a global supplier of nuclear power plants, but the UK is not the only country considering an agreement.
“There is a pattern of nations emerging across Europe rethinking nuclear cooperation with China,” said Ted Jones, senior director at the Nuclear Energy Institute, a Washington-based industrial group. He referred to the recent setbacks China’s nuclear power plant business has suffered in Romania, the Czech Republic and elsewhere.
Evidence of the risks involved has been buried in financial results released Thursday by Électricité de France, a French utility company that owns and operates the eight operating UK nuclear power plants. The company is halfway through building the first new UK station since the 1990s at Hinkley Point in south-west England, a project one-third owned by China General Nuclear, China’s state-owned nuclear company.
EDF in its quarterly results called on the UK government to soon pass legislation allowing a new, less risky financial and regulatory regime before tackling the North Sea project near a fishing village called Sizewell.
Failure to achieve these changes could lead the company to “make no investment decision” – in other words, exit the project.
“This legislation is really, really important now,” said Simone Rossi, executive director of the UK EDF arm, according to Reuters in June. British officials and EDF executives have negotiated the terms to fund the Sizewell project.
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August 2, 2021 at 12:42 p.m. ET
EDF, majority-owned by the French government, cannot afford the cost of the project upfront and wants to reduce its 80 percent stake to a minority stake to make room for other investors.
The arrangement under consideration would allow investors to get an immediate return on the capital you spend on the system through surcharges on the energy bill. Pension funds, university foundations and similar investors are likely to be drawn to predictable, long-term sources of income, analysts said. “You will find interested investors,” says Meike Becker, utility analyst at the research company Bernstein.
The critical question, however, is whether the presence of China General Nuclear financial institutions, particularly those from the United States, could pause.
In 2019, the company was blacklisted by the US government, preventing American companies from doing business with it for an effort to acquire advanced American nuclear technology for military use. In 2016, an American nuclear engineer was sentenced to two years in prison for helping the company develop nuclear materials.
“CGN has a particularly bad reputation in the United States,” said Vincent C. Zabielski, a London-based special counsel who specializes in nuclear matters with the Pillsbury law firm. Mr. Zabielski said that while investors could expect CGN to bring valuable engineering skills to the construction of the facility, the company’s presence “in some cases” could be a deterrent to American investors.
China General Nuclear declined to comment.
Ultimately, the government will decide the fate of the British nuclear program; One option that is reportedly on the table is the UK government’s purchase of China’s stake in the Sizewell project. Basically, the government wants at least one more power plant after Hinkley Point to meet their ambitious CO2 emissions. The Sizewell system would pump enough electricity for millions of households for decades. Building a new plant would also create thousands of jobs and billions of pounds worth of work to UK subcontractors.
China’s global nuclear ambitions are at stake in the UK. His plans for a nuclear power plant outside London in Bradwell-on-Sea are currently going through the UK licensing process, a critical step that Beijing hoped would be a stepping stone for its acceptance in other international markets.
China is making “every effort to establish Chinese standards in the global nuclear industry,” said Mark Hibbs, Senior Fellow of the Carnegie Endowment for International Peace. If China were successful in the UK, it would give the country decades of competitive advantage in global nuclear sales.
But the British government has bittered Beijing on a number of concerns, from cracking down on dissent in Hong Kong, a former British colony, to the harsh treatment of Uyghurs in Xinjiang province. Influenced by Washington, worries about the security risks associated with the use of Chinese technology have also increased in London.
Industry circles say it is now hard to imagine the government approving a China-designed, majority-owned facility near London, such as the one envisaged for the Bradwell project.
The situation may be different at Hinkley Point, where the Chinese company’s stake is 33 percent, and the planned Sizewell project, where the stake is 20 percent. In total, China General Nuclear has spent around £ 4 billion on the UK projects. Mr. Tugendhat said he had no objection to Chinese money in these cases because it could be easily replaced.
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