Hitachi is on the verge of abandoning its plan to build a nuclear power station at Wylfa in Wales in a move that would leave the UK’s energy strategy in jeopardy.
According to people familiar with financing discussions for the Wylfa plant, a lack of firm investor commitments means Hitachi can no longer keep putting money into the so-called Horizon project and will announce it is to pull the plug at a board meeting next week.
The suspension of construction at Wylfa, which follows Toshiba’s abandonment of a nuclear project in Cumbria late last year, will cause job losses in Wales and leave the UK with nowhere to turn but China if it wants to keep building nuclear power stations.
The loss of several planned nuclear plants leaves a gaping hole in Britain’s plans for a new fleet of nuclear reactors to keep the lights on in the coming decades as old reactors and coal plants are closed down.
Hitachi’s intention to suspend work was first reported by Japan’s Nikkei newspaper. The company said it “has been assessing the Horizon project including its potential suspension” but that “no formal decision has been made”.
Hitachi has been spending hundreds of millions of pounds a year to prepare the site on the Welsh island of Anglesey and win a UK licence for its advanced boiling water reactor. Its UK subsidiary had accrued £847m of work in progress by March 2018, which Hitachi will have to write off.
Speaking in December, Hitachi chairman Hiroaki Nakanishi said: “It’s a tough situation. We’re at the limit.”
The Horizon board is set to meet on Monday, according to senior industry figures, and will discuss alternative financing solutions for the project. Of three initial nuclear projects planned in the UK, only EDF’s plant at Hinkley Point in Somerset — already eight years behind schedule and the subject of political criticism for its generous subsidies — has started construction.
Hitachi entered the UK market in 2012 on the understanding that the government’s “contracts for difference” mechanism would provide the financing for Wylfa. But private investors have proved reluctant to support risky nuclear construction.
Hitachi last month announced the $6.4bn acquisition of the power grids division of ABB. Bankers who work with the company said it had the balance sheet strength to support Horizon or the ABB deal but not both.
The UK government and Hitachi have been in negotiations over subsidies for Wylfa with a strike price of about £75 per megawatt hour on the table — much lower than the support provided to Hinkley Point C, which had a strike price of £92.50 per MWh. Later reactors on the Wylfa site would get a strike price of £60, close to offshore wind.
Greg Clark, business secretary, suggested that the government could take a direct stake in Wylfa — a significant change in policy direction. But the Treasury has been sceptical about the idea.
“Is this problematic coming so soon after the Moorside [Cumbria project] news? Well yes I can’t pretend it isn’t, things are looking bad,” said one UK government figure.
Kepco of Korea has passed up on an opportunity to buy Toshiba’s UK project and is unlikely to be interested in Hitachi’s Welsh site either. That leaves CGN of China as the only company actively interested in acquiring further UK nuclear projects.
Theresa May launched a review of CGN’s minority investment in Hinkley Point soon after becoming prime minister over wider security concerns. Although that review gave the green light to CGN, ministers are still anxious about the political sensitivity of depending heavily on China to get its new nuclear programme off the ground.
A spokesperson for the UK business department said: “Negotiations with Hitachi on agreeing a deal that provides value for money for consumers and taxpayers on the Wylfa project are ongoing.
“They are commercially sensitive and we do not comment on speculation.”