LONDON: Britain agreed to let China own a stake in its newest nuclear power plants a few years ago, assuming Beijing had the nuclear know-how and construction skills to help replace the country’s ageing power plants.
It was a warm moment in British-Chinese relations, a deal signed in 2015 during President Xi Jinping of China’s carefully choreographed visit to London with the British prime minister at the time, David Cameron.
Six years later, Britain is reconsidering. Financing for a planned power station facing the North Sea, estimated at 20 billion pounds ($28 billion) and required to ensure a consistent supply of electricity for decades, is unexpectedly in doubt. Attracting investors to a project that is one-fifth owned by China is a challenge.
Mr. Xi’s authoritarian ambitions and human rights record have strained relations with Western nations, necessitating a rethinking of a wide range of economic dealings with the world’s second-largest economy.
In the United Kingdom, opposition to nuclear power echoes concerns expressed last year when Britain joined the United States in prohibiting Chinese telecom supplier Huawei from high-speed wireless networks on security grounds.
The 2015 nuclear deal even calls for China to be the majority owner of a proposed plant of its own design, located about 50 miles from London. Despite the fact that the project is going through regulatory channels, lawmakers are expected to be strongly opposed to it.
“We cannot risk exposing the technological heart of our power system to disruption by states that do not share our values,” said Tom Tugendhat, chairman of Parliament’s foreign affairs committee and a member of Prime Minister Boris Johnson’s Conservative Party.
China aspires to be a global supplier of nuclear power plants, but Britain is not the only country considering a deal.
“There is an emerging pattern within Europe of nations rethinking nuclear collaboration with China,” said Ted Jones, senior director at the Nuclear Energy Institute, a Washington-based industry group. He cited recent setbacks in China’s nuclear plant business in Romania, the Czech Republic, and elsewhere.
Evidence of the risks was buried in financial results released on Thursday by Électricité de France, a French utility company that owns and operates Britain’s eight operational nuclear power plants. The company is halfway through construction of Britain’s first new nuclear power station since the 1990s, at Hinkley Point in southwest England, a project owned one-third by China General Nuclear, China’s state-owned nuclear company.
EDF urged the British government in its quarterly results to pass legislation soon allowing for a new, less risky financial and regulatory arrangement before the company embarks on the North Sea project near the fishing village of Sizewell.
Failure to obtain these changes, according to the company, could result in it “not making an investment decision” — in other words, walking away from the project.
According to Reuters, Simone Rossi, chief executive of EDF’s British arm, stated in June, “This legislation is now really, really essential.” British officials and EDF executives have been negotiating terms for the Sizewell project’s financing.
Daily Business Briefing
Aug. 2, 2021, 12:42 p.m. ET
EDF, which is majority owned by the French government, claims it cannot afford to pay the project’s upfront costs and wishes to reduce its 80 percent stake to a minority holding to make room for other investors.
The proposed arrangement would provide investors with an immediate return on their investment in the plant through surcharges on energy bills. Analysts believe that predictable, long-term revenue streams would entice pension funds, university endowments, and other similar investors.
“You will find interested investors,” said Meike Becker, a utility analyst at Bernstein Research.
The critical question, however, is whether the presence of China General Nuclear will cause financial institutions, particularly those from the United States, to pause.
In 2019, the company was placed on a US government blacklist, preventing American companies from doing business with it, for attempting to acquire advanced American nuclear technology for military purposes. An American nuclear engineer was sentenced to two years in prison in 2016 for assisting the company in the development of nuclear materials.
“CGN has a particularly bad reputation in the United States,” said Vincent C. Zabielski, a Pillsbury special counsel who specialises in nuclear issues. Mr. Zabielski stated that while investors may believe CGN will bring valuable engineering skills to the plant’s construction, the company’s presence may be a turnoff for American investors “in some cases.”
China General Nuclear did not respond to a request for comment.
The government will ultimately decide the fate of Britain’s nuclear programme; one option said to be under consideration is the British government purchasing China’s stake in the Sizewell project. In general, the government would like to build at least one more power station after Hinkley Point to help meet its ambitious low-carbon targets. The Sizewell plant would provide enough energy to power millions of homes for decades. Building a plant would also generate thousands of jobs and billions of pounds in business for British suppliers.
China’s global nuclear ambitions are on the line in the United Kingdom. Its plans for a nuclear power plant near London, at Bradwell-on-Sea, are being reviewed by the British government, a critical step that Beijing hoped would pave the way for acceptance in other international markets.
According to Mark Hibbs, a senior fellow at the Carnegie Endowment for International Peace, China is “making every effort to establish Chinese standards” in the global nuclear industry. He claims that if China is successful in Britain, it will have a long-term competitive advantage in global nuclear sales.
However, the British government has turned against Beijing over a number of issues, including a crackdown on dissent in Hong Kong, a former British colony, and the harsh treatment of Uyghurs in China’s Xinjiang region. Concerns about the security risks of using Chinese technology have grown in London as a result of Washington’s influence.
According to industry sources, it is now difficult to imagine the government approving a Chinese-designed and majority-owned plant near London, as is planned for the Bradwell project.
The situation may differ at Hinkley Point, where the Chinese company has a 33% stake, and at the proposed Sizewell project, where it has a 20% stake. China General Nuclear has spent approximately £4 billion on the British projects. Mr. Tugendhat stated that he had no objections to using Chinese currency in these situations because it could be easily replaced.