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EDF and Centrica deliver blows to UK nuclear

French nuclear company EDF has put on hold plans for a new power station in the UK, plunging Britain’s atomic agenda into fresh doubt.

EDF was due to take a decision on the civil engineering contract for Hinkley Point in England in the past week, but it was revealed at the weekend that it has deferred the decision until next year at the earliest.

It is now believed that the earliest that the new reactor will be built will be in 2021, which is four years later than the UK government had hoped.

The news comes as Centrica ” owner of British Gas and EDF’s partner in the consortium to build Hinkley Point ” also said this week that it was concerned that the government’s plans for paying for nuclear power may breach European Union rules on state aid.

Under its Electricity Market Reform, the government intends to offer contracts for difference (CfDs) to generators of low carbon energy ” basically a guaranteed fixed price.

However precise details of these payments are not due until next year and in the interim, power producers are being offered ‘letters of comfort’ to act as a stop-gap until the CfDs kick in.

But Centrica is wary that this arrangement may EU breach state aid regulations and has said it cannot make any firm commitment until it knows what it might be paid and when.

Earlier this month UK Energy Minister Charles Hendry conceded that the CfD’s could fall foul of European state aid rules.

He told the UK’s Energy and Climate Change Committee that the mechanism which the industry wanted was undeliverable under EU rules.

“We have put forward a package which we believe most complies with EU requirements, while industry has other thoughts, and we will try to find a balance that gives certainty and comfort to investors,” he said.

But committee chairman Tim Yeo said: “There will be serious alarm politically if it appears that some interpretation of EU state aid rules prevents Britain from having the best market structure.”

The news this week from EDF and Centrica could not come at a worse time for the government. In March, German companies RWE and E.ON pulled out of the Horizon nuclear project to build new reactors in the UK, citing financial constraints in their native country, constraints caused by hefty early decommissioning costs brought about by the Merkel government’s decision to withdraw from nuclear power following the Fukushima disaster. With Francois Hollande taking the presidency in France ” following strong anti-nuclear sentiment from him during his election campaign ” there is concern that any drive to shut French reactors early will hit the pockets of EDF and in turn scupper the company’s spending plans in Britain.

Since the RWE/E.ON decision, Hendry and his boss, Energy Secretary Ed Davey, have tried to calm fears that the wheels are coming off the UK nuclear new build programme by stressing that the EDF-Centrica consortium is on-board and set to deliver on time.

RWE and E.ON are looking for new buyers to step in to the Horizon project, with interest said to be coming from Russia and China.