EDF board narrowly approves Hinkley Point nuclear project

By Geert De Clercq and Karolin Schaps PARIS (Reuters) - The board of French utility EDF on Thursday narrowly voted to proceed with a controversial project to build two nuclear reactors in Hinkley Point, Britain - the country's first new nuclear plant in decades. The 18 billion pound ($24 billion) nuclear reactors carry huge risks for both France and Britain. EDF will assume the up-front costs, which unions say could jeopardise the firm's survival, while Britain has committed to pay a price twice current market levels for the power generated by the plant. EDF said in a statement its board had made the final investment decision on the project and had given chief executive Jean-Bernard Levy the authority to sign all necessary contracts, but it did not detail the voting tally in the board. A source with direct knowledge of the situation told Reuters that following the resignation of board member Gerard Magnin in protest over EDF's strategy ahead of the meeting, the remaining board members had approved the project, with 10 members voting in favour and 7 voting against. The source said the six staff representatives on the board had voted against the project. Two sources with direct knowledge of the situation said that Laurence Parisot, the former head of the French employers' organisation and a candidate to become EDF chief executive in 2014 had also voted against the plan. If Magnin had not resigned and had voted against Hinkley Point, the Hinkley Point project would have been approved 10 to 8 - the narrowest of margins. "This deal was riven with more dissent in the EDF board than anyone expected. It's an unprecedented division and a far closer (vote) than predicted," John Sauven, Greenpeace UK Executive director said. The French government, which controls 85 percent of EDF's capital and sets its industrial strategy, argues the UK project will support the French nuclear industry over the next decade. EDF said on Thursday that the pouring of the first concrete at Hinkley Point, scheduled for mid-2019, will coincide with the expected start-up of a nuclear reactor it is building at Flamanville, France, which is scheduled for the end of 2018. CORNERSTONE PROJECT The British government says that Hinkley Point, which will provide about seven percent of UK power, is crucial for securing power supply in the next decade. Yet the project has strong critics on both sides of the English Channel. French unions say it is too big and costly for EDF and jeopardises the survival of the company. Opponents in Britain say the price at which the government has agreed to buy power from EDF for 35 years, at more than twice current market levels, is too high. The Hinkley Point project is a cornerstone of Britain's future energy policy. The country, one of the oldest nuclear power generating nations in the world, is relying on new nuclear plants like Hinkley Point to replace ageing stations. Nuclear plants do not emit carbon and will thus help the UK meet its target to cut carbon emissions by 80 percent by 2050. The government signed a 35-year electricity price guarantee contract, known as a "contract for difference", with EDF in October 2013, under which the utility will receive a top-up fee if power prices are below 92.50 pounds per megawatt-hour (MWh). The British day-ahead power price is currently around 40 pounds per MWh. Britain is not involved in funding the upfront costs of the project, which are carried by developer EDF and its Chinese partner China General Nuclear (CGN). However, the contract-for-difference agreement means that Britain will be paying for electricity generated from the plant if market prices are below the strike price level. The National Audit Office has estimated that a recent fall in power prices means that EDF's estimated top-up payments over the plant's lifetime have risen to 29.7 billion pounds from 6.1 billion pounds since 2013. The project was first announced in 2007, when EDF energy's chief executive said Britons would be cooking their 2017 Christmas dinners with electricity supplied by Hinkley Point. The plant's start-up date has been delayed several times since due to regulatory hurdles, the fallout from the Fukushima nuclear disaster and EDF's deteriorating financial position. Britain's political commitment to the Hinkley deal has not wilted in the aftermath of the EU referendum, even though its two key architects, former Prime Minister David Cameron and former finance minister George Osborne have been replaced by Theresa May and Philip Hammond. Shortly after taking office, Hammond said he hoped to be able to bring the project to a swift conclusion. The UK government has staked a lot of political capital in the success of the project, lauding it as a crucial part of its energy policy mix and a blueprint for how government can work with the private sector to bring in infrastructure investment. ($1 = 0.7607 pounds) (Additional reporting by Benjamin Mallet in Paris and Karolin Schaps and William James in London; Editing by Richard Lough and Alexandra Hudson)