Utility Week

UTILITY WEEK | 9TH - 15TH FEBRUARY 2018 | 15 Finance & Investment there: "Sizewell C can benefit from that big advantage, with substantial savings in grid connection costs." Rossi says an even bigger saving could be made by lowering the cost of capital using innovative financing models – ones where investors do not bear all of the construction risks as is the case for Hinkley. This would allow EDF to bring in capital from institutional investors, such as pension funds, which would otherwise consider the project too risky. He notes a recent report from the National Audit Office that chastised the government for failing to explore such options for Hinkley. The report argued that overall cost to consumers could have been reduced if the government had taken on some of the construction risks. Investor appetite Speaking separately to reporters, Rossi claims initial scouting has uncovered a "strong appetite" among institutional inves- tors to put their money in projects such as Sizewell: "Clearly these assets, once they are built and running, really fit very well with the investment strategies and the profiles of some of these players." Perhaps alluding to the London super sewer, he says there are other examples of large infrastructure projects – "we are talk- ing about projects that are in the billions" – that have been funded along similar lines. Among the companies to invest in the Thames Tideway Tunnel is Dalmore Capital. Co-founder Alistair Ray has since confirmed it is in early talks with EDF Energy about investing in Sizewell. "The problem to date is that there is too much risk in these pro- jects," Ray told the Telegraph. "If the project financing can be structured in a way which offers a fair return for the risk involved there is plenty of pension fund and insurance fund money looking to get into assets like this." Rossi says this wouldn't have been pos- sible with Hinkley: "If we were trying to do this on a completely new technology project, maybe we would be trying to do too many things at the same time." There are four EPR reactors nearing com- pletion around the world – one in France, one in Finland and two in China – but none are yet operational. Despite all being beset by long delays, Rossi claims by the time an investment deci- sion is made for Sizewell, the reactor will be a "proven technology", offering a safer bet for investors. "The fundamentals of the project are good," he adds, "so this should make the project a good candidate to do this innovation on the financial framework". Without outside financing, EDF will strug- gle to pay for Sizewell by itself. Hinkley has already placed a huge strain on the compa- ny's balance sheet. In March last year, it was compelled to sell £4 billion of new shares to finance the construction of Hinkley – mainly to its biggest shareholder, the French government. Rossi says it is "too early to tell" how much private financing EDF will seek for Sizewell. But if it is successful in drawing in institutional investors, he claims the pro- ject will be competitive with the "equivalent alternatives". By this, he means something that is low-carbon and has "the same availability profile". He warns that, although the UK has a "beautiful resource", wind power has its limits and cannot provide the firm genera- tion that nuclear can. Implicitly confirming reports that EDF believes Sizewell C can be delivered for a strike price of £70/MWh, Rossi says the com- pany currently estimates the system inte- gration costs for wind at between £10 and £15/MWh. He says this figure is projected to rise significantly as renewable penetration increases and curtailment payments, for example, swell. "We should harvest it," he adds. "But at some point, if you harvest too much of it you end up in a place where it's hurting you rather than being a benefit and there's a good mix that is what the country needs." Rossi says these rising integration costs and reduced price tag for Sizewell will ena- ble nuclear to be competitive with renew- ables "not just now, but in the future". If it is not, he admits, "there will be no project". enough power for around three million homes Construction of the jetty is well under way – it will be used to ship vast quantities of building materials directly to the Hinkley Point C site

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