Probe into UK nuclear deal could begin next week

A European Commission probe, into whether the UK acted illegally when agreeing a contract to build a new nuclear power plant, could take place as early as next week.

The FT reports that Joaquàƒ­n Almunia, the EU competition commissioner, has made known his intent to have the matter investigated at this early juncture, with the competition commissioner keen to investigate whether illegal state support has been offered.

The agreement guarantees EDFà‚ (Euronext:à‚ EDF) a “strike price” of à‚£92.50 per megawatt hour ” roughly double the current wholesale price of power ” for electricity produced at the à‚£16bn plant over a period of 35 years.

However, it has always required approval from the European Commission, which can demand changes to any terms that distort competition through illegal state support.

EDF has made clear it cannot make a final investment decision on Hinkley Point or bring in co-investors ” two state-owned Chinese groups, China General Nuclear Power Corp and China National Nuclear Corp have expressed an interest in taking a stake ” before state aid clearance is received.

The commission will examine a key concern – whether the UK government has “over-compensated” EDF with too high a strike price.

Other elements that will come under scrutiny are the rate of return on the project, the duration of the contract, arrangements for nuclear waste and decommissioning and insurance against a major nuclear event, as well as the UK’s infrastructure guarantee.

People close to the discussions also said the commission was unlikely to order a reduction in the strike price, or the duration of the project, but may demand closer monitoring to ensure EDF do not make “excessive” profits from the plant.

The Financial Times says the probe will be a crucial test case in a bitterly contested area of policy. There is huge uncertainty over how state aid rules will be applied to plans for Europe’s next generation of power plants, especially any new nuclear reactors.

The UK has argued the contract does not qualify as state aid and even if the commission decides it does, it would be compatible with EU treaties.

Mr Almunia has said a formal investigation was likely because “many people” are asking questions about the deal. “Given the challenges from anti-nuclear groups, Brussels needs to show it has followed due process,” said one person close to the discussions.

UK officials said Brussels realises the matter is a “priority for the UK” and was “putting in the resources” to get it completed by next summer.

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