Hitachi is in talks with the Japanese and UK governments about potential state financing for the multibillion-pound nuclear power station it is planning to build in Wales.
Government equity, loans and credit guarantees are among the options being explored by the Japanese conglomerate and officials in London and Tokyo, according to people briefed on the matter.
Any UK public finance for the power plant at Wylfa in Anglesey would represent a major change in policy; the British government has for years resisted the idea of exposing taxpayers’ money to the heavy expense and high risks involved in building nuclear reactors.
Philip Hammond, UK chancellor, is in Japan this week, and Greg Clark, business secretary, is expected to visit next week, with the Hitachi nuclear project high on the agenda for both.
Following a meeting with government officials and business leaders in Tokyo on Thursday, Mr Hammond that financing for the nuclear power project in Wales could total around £12bn, of which a portion would be contributed by Japan. Negotiations are continuing but bankers indicated the Japanese contribution could be on the order of ¥1tn ($8.5bn).
People involved in the process said talks still “have a long way to go” and it was far from certain that a deal with the two governments would be reached.
One person said that any UK financing would be “off balance sheet” to avoid inflating public debts. This could include the government taking a direct minority stake alongside Hitachi provided it did not bring the whole project on to the Treasury’s books. Japanese government support is likely to come in the form of loans.
UK government officials said they were “looking at options” for how the Wylfa project should be financed.
The UK’s willingness to consider government involvement reflects a change in thinking since Theresa May replaced David Cameron as prime minister last June. Her enthusiasm for “industrial strategy” — a term enshrined in Mr Clark’s formal job title — has already been widely interpreted as signalling a greater openness to intervention in business affairs.
The scheme has been given fresh momentum by the government’s approval in September for the £18bn Hinkley Point nuclear plant in Somerset — a decision which confirmed Mrs May’s support for renewal of the UK’s nuclear power industry.
However, while Hinkley Point will be fully-financed by EDF of France and CGN of China, Horizon is keen for UK government support, at least during the construction phase, according to people involved in the project.
Although UK taxpayers’ money will not be at risk in the Hinkley project, the government promised that EDF would receive a fixed amount of £92.50 per megawatt hour of electricity produced — an amount critics said was too high.
Horizon is expected to seek a similar subsidy for its electricity but people involved in the project acknowledge that it may have to accept a lower price than Hinkley — especially if it received government backing.
Horizon said it was in “complex” discussions with the UK government. “It is too early in the process to comment on specifics of the project, including cost, but we have always understood that in order for us to go ahead we will have to deliver at a competitive price for the government and the consumer.”
One person familiar with the situation pointed out that Jeremy Pocklington, the new director-general of energy at the department for business, energy and industrial strategy, had experience of off-balance sheet deals — having overseen several public-private finance agreements while at the Treasury.
Horizon says the cost of Wylfa will not be determined until its reactor design is approved by regulators and supply chain plans firm up but the company is aiming for it to be less than the £18bn price tag for Hinkley.
Additional reporting by Kana Inagaki and Robin Harding in Tokyo
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