UK pledges £2 billion for China-backed nuclear plant

Chancellor George Osborne has announced that the UK will guarantee a £2billion deal under which China will invest in the Hinkley Point nuclear power station.

Osborne, who is in China, said the deal would pave the way for a final investment decision on the delayed project by French energy company EDF.

He said it would also enable greater collaboration between Britain and China on the construction of nuclear plants.

EDF welcomed the news but did not say if it put the project back on track.

Earlier this month, EDF admitted the Hinkley project in Somerset, which was intended to allow the plant to generate power by 2023, would be delayed.

In February, the French firm announced that it had pushed back its decision on whether to invest in the plant.

The £24.5billion power station would be Britain's first new nuclear power plant for 20 years and is expected to provide power for about 60 years.

Osborne said, "Britain was the home to the very first civil nuclear power stations in the world and I am determined that we now lead the way again.

"Nuclear power is cost-competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas."

Osborne said Chinese companies would receive a substantial stake in the project, with the UK government acting as guarantor for the investment.

The guarantee will be provided by the government's Infrastructure UK Scheme, which provides finance for projects that have had difficulties raising money from private investors.

EDF has struggled to find co-investors for Hinkley, which the government has said will provide up to 7% of Britain's electricity needs from 2023.

EDF, which will continue to control the venture, has agreed to provide electricity from Hinkley at a guaranteed minimum price of £89.50 per MW hour for 35 years.

Under the deal, Hinkley Point’s developers will pay Infrastructure UK an annual fee of 2.95 per cent of the value of the loan – about £59 million – in what is effectively an insurance premium in return for the guarantee. The £2 billion loan has to be repaid by 2020.