Item 1 of 2 A general view of the turbo-alternator group in the engine room on the site of the third-generation European Pressurised Water nuclear reactor (EPR) as the Flamanville 3 power plant is ready to start in Flamanville, France, April 25, 2024. REUTERS/Stephanie Lecocq/File Photo
PARIS, Nov 27(Reuters) – French officials are drawing up plans to provide an interest-free loan to state-owned power utility EDF to finance a significant portion of the construction of six new nuclear reactors, two people familiar with the matter said.
The financing would clear a major hurdle for one of the country’s biggest public projects in years.
The plans also include a long-term guaranteed price for the power generated, known as a contract for difference (CfD), said the people, who declined to be identified because they are not authorised to speak with media.
The Ministry of Finance and EDF declined to comment.
President Emmanuel Macron announced plans in early 2022 for six new reactors with a total production capacity of about 10 gigawatts to partly replace an ageing nuclear fleet and secure future energy supplies.
France’s current 57 nuclear reactors in operation were largely financed by EDF, which was a publicly-listed company until it was fully nationalised last year.
But the company is unlikely to be able to secure private financing for new projects, given its already high debt, and there have been multiple delays and cost overruns at recent projects like Flamanville in France and Hinkley Point in England.
CZECH MODEL
While there is general agreement to provide a zero-interest loan to EDF during the construction phase, the amount is not yet decided and there are still “intense discussions” on matters such as the sharing of risk between the utility and the state from any additional costs and delays, one of the sources said.
The plan also needs approval from the finance minister once EDF submits a final costing for the projects, expected early next year.
As a form of state aid, it also needs to be cleared by the European Commission.
French officials have been encouraged, however, by Brussels’ approval for a similar financing structure for one 1 gigawatt Czech unit at Dukovany, the sources said.
Under the Czech arrangement, interest on a state loan increases to at least 2% after the plant begins operating.
Europe is seeing a resurgence of interest in nuclear power projects, with nations including Poland and the UK planning new plants to shore up their energy self-sufficiency after a major energy crisis in the region.
Financing remains a huge challenge, with construction risks weighing on utilities’ balance sheets and credit ratings.
The British government recently pledged more than 5.5 billion pounds ($6.93 billion) to help fund early development of the 3.2 GW Sizewell C project.
Another project in Britain, EDF’s 3.2 GW Hinkley Point C plant, which is expected to cost between 31 billion pounds and 34 billion pounds based on 2015 values, is also backed by a contract for difference scheme.
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Reporting by Benjamin Mallet; additional reporting by Leigh Thomas; writing by Dominique Patton; editing by Nina Chestney and Tomasz Janowski
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