ERC Research Papers
New Nuclear Build in the UK
Published February 2008
By Nigel Hawkins
Britain's government seems to think it can just give nuclear power stations the green light and they will magically appear. The truth is that only probably three European utilities, EDF, E.On and RWE, have the financial strength - market cap. and portfolio diversity - and the inclination - to take on the risk of building new nuclear power stations and the government may have to negotiate directly with them.
• Using a financial model, based on four units and with an allowance for First-of-a-Kind (FOAK) costs, the overnight capital cost is estimated at £1.5 billion per 1,250 MW unit
• The government may need to issue a Financial Indemnity for the accruing debt - similar to Network Rail - and also require electricity suppliers to sign up to a long term Nuclear Purchasing Obligation
• Over a 40 year lifetime, unit costs are estimated to be between 3.0p and 3.4p ker KWh, with a Weighted Average Cost of Capital of 7.5% (based on 70% debt and 30% equity).
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