Korean energy firm rescues UK's Moorside nuclear power project
A state-owned South Korean energy firm is to take over construction of a troubled nuclear power station planned in north-west England, in a significant boost for the UK government’s nuclear ambitions.
Kepco has been declared the preferred bidder for the NuGeneration consortium, which looked doomed earlier this year after the Japanese owner Toshiba was hit by writedowns and the eventual bankruptcy of its US nuclear subsidiary.
The plan to build reactors at Moorside in Cumbria suffered a further blow when France’s Engie also pulled out and forced Toshiba to buy its $138.5m (£103.5m) stake.
Kepco has emerged as the winner in a two-horse race between state-owned nuclear firms eyeing expansion overseas.
The Korean group beat off competition from China General Nuclear (CGN), which has a £6bn stake in the reactors that France’s EDF is building at Hinkley Point and is working to build its own nuclear plant in Essex.
Kepco and CGN are both looking to the UK after nuclear plant construction orders dried up globally in the wake of the 2011 Fukushima disaster.
Greg Clark, the business secretary, met Korean government ministers recently to discuss the NuGen deal, with insiders describing the talks as productive.
The government is understood to have given the Koreans assurances that the UK is committed to a fleet of new nuclear plants, a plan that has been criticised in the face of the falling cost of renewables.
Sources said it was Kepco’s track record of building its reactors in the United Arab Emirates on time and on budget that helped it clinch the deal.
Ministers, unions and the industry will cheer the outcome, which secures jobs and low-carbon power supplies that were at risk. But the new ownership and technology mean the plant will come online several years later than 2025, when electricity generation was originally due.
Toshiba had cleared the painstaking, four- to five-year regulatory process of getting its reactor approved by UK authorities, a process Kepco will have to start from scratch.
Kepco is understood to be planning to fit two of its APR-1400 reactors on the site, which would have a combined capacity of up to 3GW, similar to the 3.2GW for Hinkley Point C.
As well as having to clear regulatory hurdles, the Koreans are also likely to have to negotiate with the government for a guaranteed price for power from the Moorside plant.
That process took EDF several years for Hinkley and resulted in a contract that ensures the French will get £92.50 per megawatt hour, or around twice the wholesale price, for 35 years. The UK’s spending watchdog has called the project “risky and expensive”.
The price of state support for offshore windfarms has since dropped to a record low of £62.14 per MWh on average, leading one top German energy firm to say nuclear can no longer compete on price.
A source close to the NuGen project said they accepted that whatever price the Koreans secured with the government, it would have to be “significantly below” what was agreed for Hinkley.
While the sale of NuGen from Toshiba to Kepco is not signed off yet, insiders described the selection of the South Korean company as a preferred bidder as a “major milestone” in the process.
Minister are expected to use a nuclear conference on Thursday to announce a sector deal for the industry, as part of the government’s industrial strategy.
The government is likely to say it will look into ways of reducing the costs of financing new-build nuclear projects and confirm funding for a new generation of mini nuclear power plants, known as small modular reactors.
In return, the industry will promise to cut the costs of cleaning up old nuclear plants by a fifth and slash the costs of building new nuclear power stations by 20%-30% over a decade.