As India eyes private and foreign investors for expansion of nuclear power, financing models developed for the UK’s journey are worth considering
The UK went more than three decades without commissioning a new nuclear power station. That changed with Hinkley Point C, a 3.2GW twin-EPR project in Somerset aiming to become operational in 2030.
Herbert Smith Freehills Kramer acted as overall counsel to EDF Energy and
the project, helping to shape a new regulatory framework compatible with private investment.
This includes a bespoke Contract for Difference, or CfD (which later became the model for the UK’s generic renewables CfD) and a Government Support Package (GSP) addressing nuclear-specific risks.
The UK next turned to Hinkley’s replica in Suffolk. Sizewell C will generate about 7% of UK electricity over an expected operational life of more than 60 years – with carbon emissions just a fraction of solar and half of wind power.
The firm’s experience in the nuclear industry – particularly shaping the regulatory and contractual risk-sharing framework for private capital (both equity and debt) to deliver funding – should be of great interest as India embarks on its own journey of private and foreign investment in the civil nuclear sector, notably seeking INR19.3 trillion (USD207 billion) to deliver a 100GW target by 2047.
This article outlines key steps and initiatives developed for the UK, which might now be worth considering in India.
Opening nuclear to investors
Paul Butcher
Of Counsel, Energy & Infrastructure
Herbert Smith Freehills Kramer
Tel: +44 20 7466 2844
Email: paul.butcher@hsfkramer.com
The key step change embodied in Sizewell lies in its enhanced investability, an evolution that has opened the door to a far more diverse investor base at a much lower cost of capital.
Total commitments amount to about GBP8.8 billion (USD11.8 billion) in equity and GBP41.6 billion in debt. The UK government holds an initial 44.9% shareholding, along with La Caisse (20%), Centrica (15%), EDF (12.5%) and Amber Infrastructure (7.6%). HSF Kramer also advised La Caisse on its 20% stake, the first institutional equity investment in a greenfield nuclear project.
On the debt side, the UK’s National Wealth Fund has the largest commitment of GBP36.6 billion under a term facility, along with GBP5 billion of term debt from a syndicate of commercial lenders, 95% insured by Bpifrance (the French export credit agency), plus a GBP500 million working capital facility.
A separate HSF Kramer team advised the consortium of commercial lenders on the financing, the first properly limited-recourse commercial financing of a greenfield nuclear power project.
Greenfield RAB model
Dhananjaya Chak
Partner, India practice
Herbert Smith Freehills Kramer
Tel: +44 20 7466 2740
Email: dhananjaya.chak@hsfkramer.com
The core innovation enabling greater private capital participation is the regulated asset base (RAB) model. Developed in the UK through the independent regulation of privatised network businesses, it was first adapted for greenfield infrastructure on the Thames Tideway Tunnel, on which HSF Kramer advised the project company.
Sizewell represents this model’s first application to nuclear, with the key advantage of enabling a project to generate revenue during construction, allowing debt servicing and equity returns to be earned from the time of investment.
For nuclear projects with long construction periods, this has been instrumental in attracting private capital while substantially reducing costs compared to a CfD model.
The model also shares construction cost risk between the project and consumers, further reducing cost of capital. During construction, and for about three years into operations, the initial return on capital, the weighted average cost of capital (WACC), is fixed by the government. Allowed revenue is delivered through difference payments from the government-owned low carbon contracts company (LCCC) under a private law contract covering the full allowed revenue during this period, funded by consumers.
A risk-sharing mechanism addresses construction cost overruns, and a threshold caps further investment required of investors. Once in full operation, Ofgem, the UK energy regulator, determines the WACC at five-yearly reviews, starting with a post-construction review.
These reviews are closely analogous to Ofgem’s regulation of the electricity and gas networks, with allowed revenue derived from wholesale market sales and LCCC difference payments, including mechanisms to mitigate risks such as extended outages.
Government support package
The economic regulatory regime is supplemented by a GSP providing private law contractual protection against remote, high-impact risks, including political and other uninsurable risks. Key elements include: discontinuation provisions triggering compensation for lenders and equity; supplemental compensation where nuclear-specific insurance limits are surpassed; contingent financing if cost overruns exceed an upper threshold; and a government liquidity facility offering short-term debt support.
Long-term financing
Roddy Martin
Partner, India practice
Herbert Smith Freehills Kramer
Tel: +44 20 7466 2255
Email: roddy.martin@hsfkramer.com
The resulting financing is based on the whole business securitisation model used by RAB-regulated utilities, adapted with project financing elements. As the project pays for itself over 60 years, lenders cannot accept such a long repayment period, so the financing and intercreditor structure must accommodate additional debt raised during operations.
The platform financing uses common documents across creditor groups, enabling future debt (whether commercial loan facilities, institutional debt, private placement notes or public bonds) to join under a common terms framework.
The UK National Wealth Fund is initially the majority lender. The intercreditor arrangements ensure minority commercial lenders retain a voice on key decisions while not impeding the project’s general operation.
Similar issues for India
While the UK experience does not create an off-the-shelf template for international replication, nuclear projects everywhere face the same fundamental issues: How to attract patient capital to an asset class defined by long construction periods, acute risk concentration and political sensitivity.
The tools the UK fashioned to solve these problems merit some consideration, with these four highlighted areas:
(1) Nuclear third-party liability. All international nuclear liability convention regimes share the same core principles: liability is channelled exclusively to the nuclear installation operator, protecting suppliers from direct claims; liability is strict; and liability is capped, with victims protected by compulsory operator insurance and governmental top-ups.
The only exceptions to channelling are where recourse is expressly provided for in a written contract, or where the nuclear incident results from an individual’s intentional act.
On 1 January 2026, the UK acceded to the CSC, meaning that India and key nuclear supply chain partners including Canada, the US and Japan now have reciprocal arrangements respecting each other’s jurisdiction where an incident occurs, alongside all Paris Convention countries including France and Germany.
This gives all Sizewell stakeholders greater confidence against the remote risk of a successful “unchannelled claim” in a jurisdiction that does not defer to the UK’s channelling of liability solely to the operator. The GSP also contains certain protections relating to nuclear incidents and insurance.
(2) Greenfield RAB model with GSP. Perhaps the richest source of transferable ideas from the UK lies in its RAB model and accompanying GSP. The underlying toolkit addresses challenges universal to greenfield nuclear: remunerating investors during a lengthy pre-revenue construction phase; allocating construction cost risk so that the cost of capital is affordable for consumers; managing low-probability, high-impact risks that the private sector cannot price or absorb; and creating a revenue framework providing long-term visibility while retaining incentives for efficient operation.
Any country seeking private capital for new nuclear will need its own answers to these challenges. Sizewell demonstrates that, assembled into a coherent whole, they can bring institutional investors’ equity and limited-recourse commercial financing to new nuclear power projects for the first time.
(3) Funded decommissioning programme arrangements. The UK’s Funded Decommissioning Programme (FDP) regime addresses the important risk that private operators might walk away from clean-up liabilities, leaving the state exposed. Operators must obtain government approval for an FDP before operations begin, demonstrating how they will accumulate ring-fenced funds to cover decommissioning, waste management and disposal costs.
HSF Kramer designed the first-of-its-kind FDP for Hinkley and secured legislative changes to make the wider regime compatible with private investment, including under the Sizewell RAB model, where decommissioning costs are passed through as allowable costs.
The firm also negotiated contracts for the UK government to take title to spent fuel and intermediate waste. As well as protecting future taxpayers, these arrangements provide private investors with essential certainty.
(4) UK government’s multiple transaction roles. Governments have multiple roles on most nuclear projects, however the breadth of the UK government’s roles on Sizewell place it at the most complex end of the spectrum – acting simultaneously as shareholder, provider of the GSP, regulator, revenue contract counterparty and debt facility provider.
This required carefully structured solutions to identify, manage and mitigate the inherent conflicts of interest to the satisfaction of all stakeholders.
Gavin Williams, partner and head of infrastructure sector, and Siddhartha Shukla, partner, India practice at Herbert Smith Freehills Kramer contributed to the article.
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