July 23, 2018

Brexit and Sizewell C

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On 23 June 2016 the people of the UK voted in a national referendum on whether the UK should remain or withdraw as members of the European Union. The result was a historic 52%–48% majority for leaving. The ‘Brexit’ (British Exit) decision immediately created a plethora of new uncertainties and risks that have affected business decisions across a range of industries and sectors.

There is serious concern that the new uncertainty and risk created by the Brexit decision may be the final straw for the controversial and much delayed Sizewell C nuclear power station project.

The UK government considers the Sizewell C project to be very important in terms of maintaining a reasonable balance of fuels (alongside natural gas and renewable) for power generation in the medium to long term. It is estimated that Sizewell C alone will be able to generate 7% of total UK demand when operational.

The project has been beset by risk and uncertainty ever since a nuclear site licence was issued in 2012. At that time it was agreed the power station would be designed and built by French-owned EDF in return for a long-term deal to supply power to the UK grid for a fixed period at a guaranteed price. A whole series of unforeseen uncertainties and risks subsequently impacted the project. For example, there were concerns about the technical viability of the basic design and uncertainties about the final cost of the project and the ability of EDF to finance it. By 2016 the estimated final cost of the project had exceeded the market capitalisation value of EDF and French trades unions became involved, expressing concerns about the ability of the company to continue to finance the project under such conditions.

It could be that Brexit, and the new uncertainties and risks it has created, proves to be the final straw. It may also give EDF a good excuse to ‘pull the plug’ (excuse the pun) on the project once and for all without damaging company image.

The UK government committed to the Brexit referendum at the general election of 7 May 2015. At that point (several years after the nuclear site licence was issued) the referendum changed the project risk profile and introduced numerous unforeseen uncertainties and risks that were not present in 2012.