Britain gave the go-ahead on Thursday for a $24 billion nuclear power plant, ending weeks of uncertainty that strained ties with China and France but also signalling a more cautious approach to foreign investment in critical infrastructure projects.
The government of new Prime Minister Theresa May said it would proceed with the HinkleyPoint C project in southwest England, approving French utility firm EDF’s plan to build Britain’s first new nuclear reactor in decades, backed by $8 billion of Chinese cash
It also set out a new investment policy designed to give it greater control over future deals when foreign states were involved in buying stakes in “critical infrastructure”.
May, who became prime minister after the Brexit vote, stunned investors by putting the nuclear project on hold in July – just hours before a contract was due to be signed – saying she needed time to assess all aspects of the project including national security concerns.
“Having thoroughly reviewed the proposal for Hinkley Point C, we will introduce a series of measures to enhance security and will ensure Hinkley cannot change hands without the government’s agreement,” Greg Clark, business minister, said in a statement.
“Consequently, we have decided to proceed with the first new nuclear power station for a generation.”
The government said it would be able to stop the sale of EDF’s controlling stake before or after completion of the project, under the new safeguards. EDF said it had agreed with the government to retain control of the project.
EDF, China General Nuclear Power Corporation (CGN) – the project’s state-backed Chinese investor – and business lobby groups welcomed the decision to proceed.
“We are very happy the British government has approved the project,” CGN said in a statement, adding that the company could now work with EDF as planned to provide Britain with a safe, reliable, sustainable source of low carbon energy.
May’s decision in July to review the project came little more than a month after Britons voted to leave the EU in a referendum that forced the resignation of Prime Minister David Cameron – whose administration gave the initial go-ahead to the plan.
The Brexit vote, and the resulting economic uncertainty, cast doubt on the future of major British infrastructure projects. It also threw a spotlight on Britain’s trade relations with China and other big economies outside Europe.
The two new reactors at Hinkley Point, in southwest England, would provide around 7 percent of Britain’s electricity, helping to fill a supply gap as the country’s coal plants are set to close by 2025.
Britain has committed to pay a minimum price for the power generated by the plant for 35 years. Critics of the deal had expected the government to try to renegotiate the price, which they say was set too high before oil prices fell, dragging energy costs lower.
But the statement on Thursday said the price had not changed for the energy which is needed to fill a supply gap as the country’s coal-fired plants are set to close by 2025.
The decision to go ahead with Hinkley goes some way to easing concerns that May, a former interior minister, was closing the door to foreign investment, particularly from China which has plans to invest billions in British infrastructure.
According to a former colleague, ex-business minister Vince Cable, May had expressed concern at the “gung-ho” attitude that Cameron took towards courting Chinese investment.
Addressing those concerns, the government said it would take a “special share” in all future nuclear new construction projects to ensure that significant stakes cannot be sold without its consent.
CGN plans to make a number of investments in British nuclear power including the building and operating of a new nuclear power station with EDF at Bradwell-on-Sea in Essex, southeast England. Bradwell would be a Chinese-led project, using Chinese reactor technology.
“This is not out of kilter with the way that things go on in other major economies around the world,” said Martin Young, Managing Director at RBC Capital Markets. “It’s more of a safety net, a backstop, than anything else.”
CGN said it was not concerned by the new ownership rules and planned to move ahead with the Bradwell project and another minority investment in the development of a new power station at Sizewell, in eastern England.
Horizon, a nuclear new build group in Britain owned by Japan’s Hitachi’s, said it was “entirely comfortable” with the new approach.
China’s Foreign Ministry did not immediately respond to a request for comment. China began a three-day national holiday on Thursday.