Nuclear Energy (Financing) Bill (First sitting)

Matthew Pennycook Excerpts

Committee stage
Tuesday 16th November 2021 Public Bill Committees

[Virginia Crosbie]

Q Michael, what have you learned from your experiences of other countries’ financing, and how can you relate that to the RAB model?

Michael Waite: We are currently very active in the Czech Republic, Poland, Ukraine and so on. Those nations predominantly have either majority Government-owned utilities developing nuclear projects or Government financing for up to 100% of the project. They are reducing the cost of capital by fully leveraging Government financing, which is the cheapest financing. Those are absolutely all regulated approaches. No projects that we are doing currently rely just on market forces to develop nuclear; it is too much of a long-term project, with massive long-term benefits, to leave it up to the market.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I have a series of questions relating to—

[The Chair]

Before you start, Mr Pennycook, I should say that we have five people asking questions and 12 or 13 minutes left, so can everyone be swift in their questions and answers?

[Matthew Pennycook]

Q I will try and rattle through this. I have a series of questions relating to clause 1. Forgive me, Ms Pyke, but I think they will be directed mainly at you. It is quite clear in my mind that Sizewell C is the last project that can conceivably begin to generate by the end of this decade, so the Bill is very much about its effect on Sizewell C. Consumers in particular, but also Members of the House, will want to know whether the Bill is sufficiently discerning about which kinds of companies are designated, and who the RAB will ultimately go to. Could you detail precisely the interest in Sizewell C of China General Nuclear, or its subsidiaries or shell companies?

Julia Pyke: CGN currently has a 20% shareholding in Sizewell C. No material supply chain contracts are in place or intended to be in place with the Chinese supply chain or CGN. Whether CGN chooses to invest at financial close, and the extent to which it chooses to invest, is a matter for CGN itself and the UK Government. As Virginia’s question elicited, the RAB model is designed to bring in a lot more British financing and reduce reliance on overseas investors.

[Matthew Pennycook]

Q I do not want to get into the £1.7 billion—if I heard you correctly, you said that there were no express discussions, but that is really a question for the Minister rather than for you. Leaving the £1.7 billion aside, is it the company’s understanding that the Government’s intention is, as has been widely reported in the media, to divest themselves of that minority CGN stake? What options do you think are being considered in that regard?

Julia Pyke: That is absolutely a question for the Government.

[Matthew Pennycook]

Q Just to be very clear, because I think this has implications for the funding model, do you not think that that minority stake, and the potential force-out divestment by the Government, has any implications for the RAB funding model for Sizewell C?

Julia Pyke: I think that Sizewell C can raise money under the RAB model. How CGN intends to go forward with a financial investment in Sizewell C is a matter for CGN and the Government.

[Alun Cairns (Vale of Glamorgan) (Con)]

Q As we have highlighted, the benefits of the RAB model are that it reduces the cost of finance and provides financial certainty for any project—those are two key inhibitors in the development of new nuclear fleet. However, the construction of nuclear power stations is inherently uncertain because of the risk associated with it, and costing that risk is extremely difficult. Are you satisfied that the Bill gives the Minister the opportunity to assess the cost of that risk effectively? The alternative would be the failure of the RAB model, which would undermine the fleet generation that we would like to see.

Julia Pyke: I think that the Bill is a great framework under which there is a lot of detail to be developed, and we would expect more detail to be developed in relation to designation and the conditions of eligibility. While I could hardly deny that the cost of nuclear builds has had some uncertainty in some cases, what is not uncertain is whether nuclear works and the technology works. I think there are no cases worldwide of nuclear projects that have been abandoned for technical reasons. The industry knows how to make nuclear power stations work. So I think that there is a degree of uncertainty about the exact cost, but the whole point of building a replica of Hinkley is to minimise that uncertainty, benefit from all the lessons learned and get nuclear on to a stable, repeat-build footing.

David Powell: We designed our SMR BWRX-300 on the basis of proven technology. So we know very much the cost base for that technology, and it is really in our interest and that of investors to ensure that we can deliver to time and to budget on that. With respect to the build, we would obviously want to try to minimise any impact and risk of cost and schedule overruns, because we see this as building a fleet of smaller reactors out of a more modular-type approach.