EDF Asks UK to Trigger Force Majeure in Hinkley Nuclear Contract

(Bloomberg) -- Electricite de France SA has asked the UK to trigger a force majeure clause in the subsidy contract for its Hinkley Point C nuclear power plant.

The company has applied to a government agency to be allowed to declare a force majeure covering one year of delays due to Covid-19 restrictions that curbed the number of workers on the project, according to Stuart Crooks, managing director for Hinkley Point C. If approved, it will extend the time EDF has to start generating electricity before it starts losing funding.

The claim has been borne out of the escalating delays and cost overruns at Hinkley Point C. The reactors are supposed to be the beginning of a nuclear renaissance in Britain as the government seeks to boost the country’s energy independence and cut its reliance on fossil fuels.

In May, the start date for the plant’s first unit was pushed back to June 2027 and the company has flagged a possible further 15 months of extra time it may need. As things stand, both units need to be generating by 2029 or the company loses a day of subsidy for every day it’s late. The contract for £92.50 ($110.77) a megawatt-hour for 35 years is now below the market rate. 

“We know the income stream for this project when we’re finished so the biggest incentive for us is to finish,” Crooks said in an interview at the site in Somerset. A force majeure extension would be “the government accepting that there has been a delay that is quantifiable and measurable, consistent with our estimates of what we put into the market.”

If all of the extra 15 months is needed, the second unit of the 3.2 gigawatt project will be pushing up against its subsidy deadline. The pandemic-related delays have added £1 billion pounds to the now £26 billion-pound station, Crooks said.

EDF’s second project, Sizewell C, received planning permission on July 20 and the company is now trying to hammer out a financing deal with the government.

It’s not just Covid-19 that’s caused delays, construction of Hinkley Point C is requiring more materials than expected. The design for the electrics, heating and ventilation isn’t complete yet and extra wires, brackets and bolts are costing £500 million more than expected, Crooks said.

War Impact

Russia’s invasion of Ukraine is making things more difficult too. About 400 of EDF’s suppliers for the site are declaring their own force majeures, asking for more time to deliver on their contracts. 

EDF was importing a lot of steel from Ukraine and had to find a replacement supplier once war broke out. Its supplier of nickel, used for stainless steel, was sanctioned because of ties to Russia.

“We’re dealing with issues in our supply chain every day,” Nigel Cann, delivery director for Hinkley Point C 

Those possible delays and extra costs are already factored into the estimates given in May, according to Crooks. 

The biggest risk for additional delays to the project is people, according to Crooks. Hinkley has about 7,500 staff on site each day and finding people with the right training and skills is difficult especially now the UK has cracked down on European workers since Brexit. EDF has raised the issue of worker visas with the government.

“We had a lot of Eastern European workforce here, some of them went home during Covid and never came back,” Cann said. “So it’s a challenge for us.”

For example, the site needs about 250 more steel fixers with 900 already on site, Cann said. Attracting people to the jobs is more difficult since the pandemic because people want flexibility that engineering doesn’t offer.

The new strain of the virus is still causing staffing issues at the site, Cann said. There are some lingering concerns about a resurgence of restrictions this winter.

“Covid is still a real issue, it’s not going away,” Crooks said. “We’ve seen another wave of Covid now with absences from site and absences cause efficiency problems.”

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