Britain gave the go-ahead for a $24 billion (£18.1 billion) nuclear power plant on Thursday, ending weeks of uncertainty that had strained ties with China, which will help pay for it, and France, which will build it.
Prime Minister Theresa May’s government signalled it would take a more cautious approach in future over foreign investment in big infrastructure projects than her predecessor David Cameron.
But ultimately, after stunning Paris and Beijing by putting the deal on hold in July after May took office, it agreed to go ahead with the Hinkley Point C project in southwest England. Britain’s first new nuclear power plant in decades will be built by French state-controlled utility firm EDF (EDF.PA), backed by $8 billion of Chinese cash.
The deal is part of a recovery of the global nuclear power industry following a slump caused by the 2011 Fukushima disaster in Japan.
The government drew fire for approving it without renegotiating the price British consumers will pay for electricity. The opposition Labour Party supports the project in principle but says its guarantee to pay a minimum of roughly double the current market price for electricity for 35 years is a rip-off.
May’s government said a new investment policy would give it greater control over future deals when foreign states are involved in “critical infrastructure”, a departure from the more open approach pursued by Cameron.
May inherited the deal from Cameron, who quit as prime minister after losing Britain’s referendum to stay in the EU. In one of her first acts, she put the project on hold, hours before a contract was due to be signed, saying she needed time to assess it.
“The government has decided to proceed with the first new nuclear power stations for a generation,” business minister Greg Clark told parliament on Thursday, setting out changes to the deal and British policy on foreign infrastructure investment.
“These changes mean that while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment works always in the public interest,” he said.
Supporters of the project said Britain needed to protect its relations with major economies after voting to leave the European Union, and show it was open for business.
The Chinese Foreign Ministry said it welcomed the decision while Chancellor Philip Hammond said it continued the strategic partnership between the two countries.
Under the new plan, the government will be able to block the sale of EDF’s controlling stake before or after completion of the project – a proviso it said it would apply to significant stakes in all future nuclear projects. EDF said it had agreed with the government to retain control of the project and would sign the deal “in the coming days”.
China General Nuclear Power Corporation (CGN) – the project’s Chinese state-backed investor – and business lobby groups also welcomed the decision on Hinkley.
“We are very happy the British government has approved the project,” CGN said in a statement.
The two new reactors at Hinkley Point are scheduled to be running by the middle of next decade and 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.
Critics have focussed on the guaranteed price for electricity, which they say does not reflect falling energy prices since the deal was drawn up, or anticipated declines in the costs of rival clean technologies like wind and solar power.
“It is extraordinary that they have not reviewed the price per unit of power,” said Barry Gardiner, the opposition Labour Party’s energy spokesman.
The deal also affirmed the government’s commitment to replace its old nuclear power stations. Nearly all of Britain’s eight functioning nuclear plants will have to shut down by 2030.
Environmental lobby groups, some opposition political parties, and a former board member at EDF said that was a mistake.
“The decision to go ahead with Hinkley Point is a bad choice for both France and the UK,” former EDF board member Gerard Magnin told Reuters. Magnin resigned from the board in protest at the company’s nuclear strategy before a vote that narrowly approved the project.
“By concentrating technical and financial means in this investment on both sides of the channel, the respective governments and EDF will deprive their citizens and small companies of the opportunities for jobs and innovation that would come from inventing the 21st-century energy world.”
The decision to go ahead with Hinkley goes some way to respond to concern that May, a former Home Secretary, was less receptive 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 wariness 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 future nuclear projects to ensure that significant stakes could not be sold without its consent.
Simon Taylor, academic director of the Master of Finance Programme at Cambridge University, said he thought the policy was largely cosmetic.
“The UK really needs investment in infrastructure. There are very few nuclear operators around the world. Most are already seeking to invest in the UK and so it’s not clear who they would regard as unwelcome, beyond Russia,” he said.
CGN plans to make a number of investments in British nuclear power including the building and operating of a new station with EDF at Bradwell-on-Sea, southeast England. Bradwell would be a Chinese-led project, using Chinese reactor technology.
The government also said it was introducing broader rules to increase scrutiny of the national security implications of foreign ownership and control of critical infrastructure, including the need for continuous government approval of foreign owners and a review of takeover rules. It did not specify what sort of projects would be included.
A source close to CGN said it was not concerned by the new ownership rules and planned to move ahead with 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 (6501.T), said it too was “entirely comfortable” with the new approach.
China’s Xinhua news agency, which offers a reflection of official thinking, welcomed the decision albeit with a thinly-veiled criticism of the delay.
“Let us hope that London quits its China-phobia and works with Beijing to ensure the project’s smooth development,” it said in an editorial published on Thursday.