Britain gave the go-ahead for a $24 billion (£18.1 billion) nuclear power plant on Thursday, ending weeks of uncertainty that strained ties with China and France but also signalling a more cautious approach to foreign investment in critical infrastructure projects.
Prime Minister Theresa May’s government said it would proceed with the Hinkley Point C project in southwest England, approving French utility firm EDF’s (EDF.PA) plan to build Britain’s first new nuclear reactor in decades, backed by $8 billion of Chinese cash
It also set out a new investment policy designed to give it greater control over future deals when foreign states were involved in buying stakes in “critical infrastructure”.
The project offers an insight into how Britain could conduct relations with the world in a post-Brexit era. May, who became prime minister after Britain’s EU referendum, stunned Paris and Beijing by putting the deal on hold in July – hours before a contract was due to be signed – saying she needed time to assess all aspects of the project including national security concerns.
“The government has decided to proceed with the first new nuclear power stations for a generation,” business minister Greg Clark told parliament on Thursday, setting out reforms to the deal and British policy on foreign infrastructure investment.
“These changes mean that while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment works always in the public interest,” he said.
The government said it would be able to block the sale of EDF’s controlling stake before or after completion of the project, under the new safeguards – a proviso it said it would apply to significant stakes in all future nuclear projects.
French state-controlled EDF said it had agreed with the government to retain control of the project and would sign the deal “in the coming days”.
China General Nuclear Power Corporation (CGN) – the project’s Chinese state-backed investor – and business lobby groups also welcomed the decision on the Hinkley deal, which is part of a gradual recovery of the global nuclear industry following a slump caused by the 2011 Fukushima disaster.
“We are very happy the British government has approved the project,” CGN said in a statement.
May’s decision to review the project came little more than a month after Britons voted to leave the EU, which forced the resignation of Prime Minister David Cameron whose administration gave the initial go-ahead to the plan.
The Brexit vote, and the resulting economic uncertainty, cast doubt on the future of major British infrastructure projects. It also threw a spotlight on Britain’s trade relations with China and other big economies outside Europe.
The two new reactors at Hinkley Point are scheduled to be running by the middle of next decade and provide around 7 percent of Britain’s electricity, helping to fill a supply gap as the country’s coal plants are set to close by 2025.
Britain has committed to pay a minimum price for the power generated by the plant for 35 years.
Critics of the deal said the government should have renegotiated the price, which they say was set too high before oil prices fell, but the statement on Thursday said the price had not changed for the energy.
“It is extraordinary that they have not reviewed the price per unit of power,” said Barry Gardiner, the Labour Party’s energy spokesman.
The deal also affirmed the governments commitment to replace its old nuclear power stations – nearly all of Britain’s eight functioning nuclear plants will have to shut down by 2030.
Environmental lobby groups, some opposition political parties, and even a former board member at EDF said that was a mistake.
“The decision to go ahead with Hinkley Point is a bad choice for both France and the UK,” former EDF board member Gerard Magnin told Reuters. Magnin resigned from the board in protest at the company’s all-nuclear strategy ahead of a vote that narrowly approved the project.
“By concentrating technical and financial means in this investment on both sides of the channel, the respective governments and EDF will deprive their citizens and small companies of the opportunities for jobs and innovation that would come from inventing the 21st-century energy world.”
The decision to go ahead with Hinkley goes some way to easing concerns that May, a former Home Secretary, was closing the door to foreign investment, particularly from China which has plans to invest billions in British infrastructure.
According to a former colleague, ex-business minister Vince Cable, May had expressed concern at the “gung-ho” attitude that Cameron took towards courting Chinese investment.
Addressing those concerns, the government said it would take a “special share” in all future nuclear construction projects to ensure that significant stakes could not be sold without its consent.
“This is not out of kilter with the way that things go on in other major economies around the world,” said Martin Young, Managing Director at RBC Capital Markets. “It’s more of a safety net, a backstop, than anything else.”
CGN plans to make a number of investments in British nuclear power including the building and operating of a new nuclear power station with EDF at Bradwell-on-Sea, southeast England. Bradwell would be a Chinese-led project, using Chinese reactor technology.
The government also said it was introducing broader rules to increase scrutiny of the national security implications of foreign ownership and control of critical infrastructure, including the need for continuous government approval of foreign owners and a review of takeover rules
It did not specify what sort of projects would be included.
CGN said it was not concerned by the new ownership rules and planned to move ahead with the Bradwell project and another minority investment, in the development of a new power station at Sizewell, in eastern England.
Horizon, a nuclear new build group in Britain owned by Japan’s Hitachi’s (6501.T), said it was “entirely comfortable” with the new approach.
China’s Foreign Ministry did not immediately respond to a request for comment, however China’s Xinhua news agency, which offers a reflection of official thinking, welcomed the decision albeit along with a thinly-veiled criticism of the delay.
“Let us hope that London quits its China-phobia and works with Beijing to ensure the project’s smooth development,” it said in an editorial published on Thursday.