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HINKLEY POINT GO-AHEAD: HAS THE “GOLDEN ERA” IN UK/SINO RELATIONS BEEN MAINTAINED?

The UK government has given the go-ahead for construction of the nuclear power station at Hinkley Point.  Although there is to be no amendment to the commercial terms of the project, to be built by EDF with co-investment from the China National Nuclear Corporation (CNNC) and China Guangdong Nuclear Power (CGNP), there are to be “new rules governing foreign investment in critical infrastructure”.

In undertaking a review of the “public interest” test in the Enterprise Act 2002, determining when Government can intervene in significant deals, the impact of the nuclear programme is uncertain.

We are told that in future there will be:

  • …[a]…”legal framework for foreign investment in critical infrastructure”; and
  • “…additional security scrutiny to which the government plans to subject future nuclear projects…”.

The first of these, whereby the government will in future hold a golden share in all nuclear power projects, is unexceptional.  But of more concern, potentially to Beijing, is the as yet unclear nature of additional security scrutiny.

China agreed to invest £6bn into Hinkley Point so as to be able to build its own reactors in the UK as a shop window for its capabilities.  None of the major components in the Hinkley power plant, all of which have already been procured, will come from China. Should additional regulatory scrutiny restrict China’s other nuclear ambitions in the UK, notably a planned power plant at Bradwell, it could jeopardise the rationale for Chinese investment at Hinkley Point.  EDF has warned that, without Chinese money, it may not proceed with the Hinkley scheme.

Although the concerns of security chiefs and Nicholas Timothy, the prime minister’s adviser, have been addressed with a compromise that avoids an outright block, there is no clarity on the extent to which China is to be encouraged to play a strategic role as an investor in the UK nuclear programme.

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.   

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.

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HINKLEY NUCLEAR DEAL: A GOOD MOVE FOR BRITISH NUCLEAR?

The deal has finally been struck, with the Chinese agreeing to fund about one-third of the £18bn cost of EDF’s Hinkley Point C reactor, which aims to be operational by 2025. Prime Minister Cameron announced the “historic” deal, which will see the new station supply enough electricity to power six million homes and create 25,000 jobs. As anticipated, the deal also included investment decisions surrounding the financing of EDFs Sizewell C and a planned Chinese reactor at Bradwell in Essex. But two further pieces of the jigsaw must still be put in place before construction at the Somerset site can begin. These are the Final Investment Decisions by the boards of EDF and CNG, the Chinese partner. However, these are seen as just a formality; it appears unthinkable that they would be anything other than positive given the degree of political commitment.

It is worth noting that the partnership between EDF and the Chinese is nothing new. The French have been involved in the Chinese nuclear programme for some 30 years and are involved in the construction of the Taishan 1 and 2 EPR plants in Guangdong province. The reactors here are of similar design to those at Hinkley Point C, and unlike the projects at Flamanville and Olkiluoto, this project is going very well and is reportedly 40 months ahead of schedule. Something to be said about working with the Chinese?

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resources projects in the UK and internationally.

For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.

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CHINESE STATE VISIT: IMPLICATIONS FOR UK NUCLEAR STRATEGY

There is much anticipation surrounding the upcoming visit of Chinese President Xi Jingping.

He will no doubt face press coverage on a number of controversial issues, from the ivory trade to human rights. However, the pending nuclear deal between Chinese partners and EDF on the financing of the Hinkley Point C European Pressurised Water Reactor (EPR) is coming under a particularly bright spotlight.

On Tuesday or Wednesday, President Xi Jingping is expected to sign an agreement that will pave the way for EDF’s Final Investment Decision. This may also see funding put in place for a new EDF reactor at Sizewell in Suffolk and a Chinese built reactor at Bradwell in Essex.

Notwithstanding EDF’s construction delays on building similar EPR reactors in Flamanville (France) and Olkiluoto (Finland), the security implications of Chinese written software running the new stations is also raising anxiety in certain quarters. But should we be overly concerned? The Office for Nuclear Regulation will, as part of its independent scrutiny of the construction and operation, be supported by cyber-security experts in analysing the software for suspicious code.

Moreover, would the Chinese hide malicious code and thereby threaten their investment in the UK and its wider nuclear exports markets? Time will no doubt tell, but the risk on our side seems to be worth taking; at least the Prime Minister and EDF seem to think so.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resources projects in the UK and internationally.

For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.

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ENERGY NEWS FROM CHINA

 

Jonathan Green, Prospect Law

The CIA estimated that in 2013 China generated 69.1% of its power from fossil fuels, 1.2% from nuclear fuel, 22.5% from hydro-electric plants, and 7.2% from other renewable sources. Although China is the world’s largest user and producer of coal and the world’s largest emitter of CO2 and other greenhouse gases, in 2013 China led the world in renewable energy production. Today that lead has increased.

Since 2009 the Chinese leadership has declared its intention to reduce its carbon emissions by 45% from 2005 levels. The common assumption is that the expansion of renewable energy generation is driven by concern over climate change. This is only partly true.

Perhaps a more important consideration is China’s goal of energy security, and reducing its reliance on imported oil and coal. China has developed the largest high speed electric rail network and is working hard to secure a viable future for electric vehicles. The need to import oil and coal are a strategic weakness which is regarded internally as incompatible with China’s status as the new superpower.

A third factor is the appalling levels of airborne pollution in the major cities. China’s official sensors measure pollution on a scale up to 500, which is known, in classic doublespeak, as the Air Quality Index. The WHO advises 25 as the safe limit, but Beijing regularly deals with levels over 400. People wear masks and schools close. Beijing is now regarded as a hardship posting for expats. Many runners dropped out of the 2014 Beijing marathon when their face masks turned grey. In January this year the readings hit 500, and the US embassy in Beijing even recorded 545. The US government (http://www.stateair.net/web/post/1/1.html) advises that when the levels are between 301 and 500 “Everyone should avoid all outdoor exertion.”

For the Asia-Pacific Economic Cooperation meeting in Beijing last year, factories were closed within a 125 mile radius, banks and schools were closed, public sector employees were sent home, half the cars in the city were banned from the roads, bodies were not cremated, no weddings were licensed, no passports issued, and no fresh produce was delivered to the city. The skies became blue, which the locals called ‘APEC blue’.

In March this year Chinese journalist Chai Jing published an online documentary in China which went from viral internet sensation to being banned in three weeks. Called ‘Under the Dome’, the documentary is a brilliant analysis of the scale of China’s problem with pollution and a clear indication of the depth of anger the new middle class feel about the damage to their health. When questioned about the documentary by a reporter from the Huffington Post, Premier Li Keqiang did not challenge the documentary, and replied:

“I want to tell you that the Chinese government is determined to tackle environmental pollution, and tremendous efforts have been made in this regard. The progress we have made still falls far short of the expectation of our people. Last year I said that the Chinese government would declare a war against environmental pollution. We are determined to carry forward our efforts until we achieve our goal.

We must get the focus of our efforts right. This year our focus will be to ensure the full implementation of the newly revised environmental protection law. All illegal producers and emitters will be brought to justice and held accountable. We need to make the cost for pollution too high to bear. More support, including capacity building, needs to be given to these environmental law enforcement departments.”

China’s energy policies will be crucial in tackling the massive pollution problem. We can expect China’s global lead in all forms of renewable and clean energy use to increase for the foreseeable future.

This is the first of a series of articles on China’s energy sector.

 

Introduction to Prospect Law and Prospect Energy

Prospect Law is an energy specialist law firm which is based in London and the Midlands of the UK. It is a sister company of Prospect Energy which is a technical consultancy company. The two firms provide advice on energy development projects and energy related litigation concerning onshore oil and gas, nuclear and renewable energy schemes for clients in the UK and internationally.

 

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For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.