Sizewell C seeks investors, new financing model has yet to attract interest

The UK government has launched a process to find an investor for the Sizewell C nuclear power plant. Interested parties have been able to apply since the start of this week. The government is seeking to attract investors primarily with a new financing model, the so-called regulated asset base (RAB) model.

The UK is continuing preparations for the construction of the Sizewell C nuclear power plant. It is set to be the second nuclear power plant following a more than two-decade hiatus in construction. The first is Hinkley Point C.

Like the aforementioned Hinkley Point C, Sizewell C will generate electricity using two EPR reactors supplied by France's EDF. Although a final investment decision has not yet been made, it cannot be expected before 2025. Once commissioned, the plant is expected to supply electricity to around 6-7 % of British households for up to 60 years.

Before construction can begin, however, an investor for the project must be found. It is expected to take a stake of up to 60 %. The remaining 40 % is to be split equally between EDF and the UK government.

Investors have so far been rather reserved about the offer. This is also why the UK government has hired British bank Barclays to help it find investors.

The investor should be a company with previous experience of large infrastructure projects. The company will also have to meet national security requirements in order to rule out any geopolitical risks. The government wants to avoid the same situation that arose at the start of the project, when China's CGN was among the investors.

The UK government has chosen a different construction financing model for Sizewell C than it used for Hinkley Point C. That model proved disadvantageous because it significantly increases the price of each MWh generated due to financing costs (in the case of the Hinkley Point C nuclear power plant, these account for up to two-thirds of costs).

Sizewell C will therefore use the so-called regulated asset base model. Its main advantage is that the investor recoups part of its investment costs during construction through regulated charges included in electricity prices. By contrast, under other financing models, such as a contract for difference, the investor only receives returns after the plant is completed through revenues from electricity sales.