The UK government is to pay Chinese state-owned power group CGN over £100mn to exit Britain’s £20bn Sizewell C nuclear energy project in a bid to reduce Beijing’s involvement in the country’s infrastructure.
The payment to CGN for its 20 per cent stake in the proposed nuclear plant in Suffolk is part of a £679mn UK state investment in Sizewell first announced by former prime minister Boris Johnson in September and finalised on Tuesday.
It highlights how relations between London and Beijing have cooled since a nuclear deal in 2015 between then prime minister David Cameron and President Xi Jinping kicked off CGN’s involvement in the project.
Tensions between the west and China have risen in recent years, and concerns about Chinese involvement in British infrastructure have mounted. Rishi Sunak, British prime minister, declared this week that the “golden era” of UK-Chinese ties announced by Cameron was “over”.
BEIS, the business department, said the government investment in Sizewell allowed CGN to exit “including buyout costs, any tax due and commercial arrangements”. It refused to put a precise figure on the agreement.
However, two people familiar with the negotiations said the payment was just over £100mn, reflecting expenditure by the Chinese company so far on the site.
The British government has set aside up to £1.7bn overall to invest in new nuclear energy during the current parliament, which is set to end in late 2024.
Under longstanding plans, the government and EDF — the French state-owned energy giant — will each take a 50 per cent equity stake in the Sizewell C, which is expected to cost £20bn at 2015 prices.
It will be Britain’s first state investment in a new nuclear power station since Sizewell B in 1987 — the previous nuclear plant to be completed in the country.
Construction will not begin in earnest until the consortium has raised close to £20bn of equity and debt from private investors. That fundraising could take at least a year and has no guarantee of success.
UK government officials said that the departure of CGN would clear the way for US investors to put money into Sizewell C, since the Chinese company has been put under US sanctions.
EDF and the government hope private sector investment will dilute their own stakes in the project, which they expect to fall to 20 per cent apiece when construction begins, with other investors owning the remaining 60 per cent.
Under the plan, Sizewell C’s two reactors would have a combined capacity of 3.2 gigawatts by the mid 2030s, enough to meet about 7 per cent of the UK’s electricity needs. The project received approval from the government in July from Johnson’s administration.
CGN remains a minority 33 per cent investor in Britain’s giant Hinkley Point C nuclear power station in Somerset, another EDF led project. Although this has already been delayed by several years, it is intended to be the first of a new generation of nuclear power stations.
The Chinese group also controls a site at Bradwell-on-Sea in Essex, where it hopes to be the lead investor in a new generator.
CGN’s planned use of its own reactor technology at Bradwell received former approval from Britain’s nuclear regulator in February. But ministers think that ultimately it will not be allowed to build at the site, which they expect to change hands in due course.