EDF Energy and its partners have got an “outstanding deal” from government to support the new nuclear power station, according to Liberum Capital.
The report, entitled “flabbergasted”, forecast a return on equity for the project “well in excess of 20 per cent and possibly as high as 35 per cent”. Investors can expect dividends of between £65 billion and £80 billion during the 35 year lifetime of the contract, according to the analysts’ calculations.
Littered with words like “astonishing”, “extraordinary” and “economically insane”, the note accuses the UK government of taking a “massive bet” that fossil fuel prices will rise steeply. For nuclear to look competitive with fossil fuels in 2023, the gas price will need to rise by 130 per cent, it said.
Author Peter Atherton said: “We are frankly staggered that the government thinks it is appropriate to take such a bet and underwrite the economics of any power station that costs £5 million per MW and takes 9 years to build.”
Excluding hydro schemes, Hinkley Point will be “the most expensive power station in the world” for each MW of capacity, he said, arguing the UK could build 27GW of gas-fired power stations for the same price.
The government agreed a “strike price” of £92.50/MWh for power generated at Hinkley Point C. This will be fully indexed to inflation – a decision described as “perhaps the extraordinary feature of the deal”, given the low operating costs of nuclear.