Why taxpayers will share the pain of cost of building Sizewell C nuclear power plant
It was as long ago as 1982, back in the pre-privatisation days of the Central Electricity Generating Board, that the idea of building a new nuclear power plant in Suffolk – Sizewell C – was first mooted.
At that time, construction had yet to begin on the neighbouring Sizewell B, which for now remains the youngest of Britain’s operating nuclear power plants.
The first planning application was filed as long ago as 1989 and there have been countless false starts since.
The theoretical cost of construction was pushed up when Margaret Thatcher‘s government insisted that any company building a new nuclear power station would also have to have funding in place for not only its construction but also for the disposal of waste and the eventual decommissioning of the plant.
That proved a major obstacle to new nuclear build which was then further held up by Tony Blair’s reluctance to take on opponents of new nuclear build in his own party – although, in 2006, he eventually committed to the cause, as did his successor, Gordon Brown.
Hinkley Point C, the UK’s first new nuclear power station in a generation, was the upshot.
New financing key to unlocking nuclear
Yet the construction of the Somerset plant is years behind schedule. EDF, the French energy giant building it and which will construct Sizewell C, originally envisaged it opening in 2017. Hinkley Point C is also billions of pounds over budget.
And the coalition government’s decision to guarantee EDF a fixed price for the energy generated at Hinkley Point C, which was necessary to persuade the French company to go ahead with the project, was subsequently heavily criticised.
The National Audit Office (NAO) said the agreement had locked consumers into a “risky and expensive” project – although, ironically, the deal now looks good value following this year’s spike in wholesale electricity prices.
The NAO’s report did, though, make subsequent governments wary, once more, of new nuclear build.
Theresa May immediately demanded a review of Hinkley Point C on becoming prime minister and, even though her government ultimately approved the project, she also took note of a suggestion in the NAO’s report that new funding models be considered for subsequent new nuclear power stations.
That, in a nutshell, is why it has taken so long for Sizewell C to finally get off the ground. These plants are so monstrously expensive to build that no private sector company is willing to bear all of the risks themselves without some support from government. It is also why the likes of Japan’s Hitachi and South Korea’s Kepco have reluctantly walked away from building new nuclear plants at Wylfa on Anglesey, Oldbury in Gloucestershire and Moorside in Cumbria.
So key to unlocking the project has been coming up with a new way of financing it.
The solution
The government’s solution is the funding model known as Regulated Asset Base (RAB) – the means by which other major infrastructure projects, such as the £4.3bn Terminal 5 at Heathrow Airport, have been financed.
Under this arrangement, rather than guarantee whoever builds Sizewell C a set price for the electricity it generates, taxpayers will be taking risk alongside other investors.
This is why the government is investing an initial £700m in the construction of the plant although, with the total cost likely to come in at between £20-£30bn, that will only go so far.
The other elements in the RAB model include electricity consumers – households and businesses – paying for the plant while it is still under construction through their bills.
This is how, for example, the £4.13bn Thames Tideway tunnel now under construction is being financed. A share of the cost of the project, which is aimed at preventing sewage spills into the Thames estuary as well as future-proofing London’s sewerage system for expected population growth, is being met by customers of Thames Water on their bills.
The arrangement means taxpayers share in the pain of any cost-overruns. Other crucial aspects of the RAB model include an ‘economic regulatory regime’ (ERR), overseen by an independent regulator, who determines the extent to which investors and taxpayers will share the risks by setting the amount of revenue that EDF will be allowed as it builds Sizewell C.
Unknown sums but less risk
The government has yet to make clear the sum that billpayers will have to contribute towards the new power station but newspaper reports have suggested it will be in the region of an additional £1 per month per customer.
The Department for Business, Energy and Industrial Strategy said today that the lower cost of financing a large-scale nuclear project through this scheme was “expected to lead to savings for consumers of at least £30bn on each project throughout its lifetime” compared with the existing arrangements governing the financing of Hinkley Point C.
Big Carl, the world’s biggest crane, in action at Hinkley Point C nuclear power plant near Bridgwater in Somerset
So in theory, while there is a risk attached to building Sizewell C, the funding model proposed appears to be less risky than the way in which Hinkley Point C has been financed. The ultimate cost to electricity consumers in the latter case was dictated simply by a decision made a decade ago on the price that EDF would be promised for its power. It currently looks good value but, for much of the last decade, it has not.
Yet the RAB model does have its critics.
Less incentive to control costs
Steve Thomas, emeritus professor of energy at the University of Greenwich, has argued that, by removing construction risk from EDF, the company has less of an incentive to control construction costs. With Hinkley Point C, EDF has had to bear the cost of any over-runs. With Sizewell C, taxpayers would be on the hook.
Professor Thomas argues that this is particularly worrying because he believes EDF’s cost estimates are too optimistic. He has also argued that the £1-a-month levy on household bills, should it come to pass, is also potentially flawed because of assumptions it is making about borrowing costs.
Less risky, for now, appears to be the ownership of Sizewell C. Objections to the involvement of the Chinese state-owned company China General Nuclear, originally raised by the May government, have resulted in the company now being bought out of its interest in Sizewell C. The project will instead be jointly owned by EDF and the UK government – although there has been speculation that new investment could also be brought in from the sovereign wealth fund of the United Arab Emirates.
There are, though, some other objections. The idea of building small modular reactors by companies like Rolls-Royce has won support on the basis that the technology could be cheaper and more scalable than big projects like Sizewell C. They would also, in theory, involve less cost in adapting the national grid.
Prime Minister Boris Johnson during a visit to EDF’s Sizewell B nuclear power station in Suffolk.
The EDF question
Another risk concerns EDF itself. The company recently had to be bailed out and fully nationalised by the French government following the spike in wholesale prices.
But this means EDF is now effectively run at the behest of the French government. France is also anxious to build new nuclear power plants. Should EDF become cost-constrained it is perfectly plausible that the French state would direct it to focus on its domestic projects rather than its ones overseas.
There have already been hints of this.
EDF’s former chairman and chief executive Jean-Bernard Levy, who was effectively fired by President Macron after opposing nationalisation, was a strong supporter of Sizewell C but was hampered by the French government’s constant demands for more information on the project.
One final risk is that electricity demand does not increase in the way that the government is assuming and that Sizewell C’s output may not be needed.
However, with electricity demand projected to double as the UK decarbonises, that feels less worrisome than some other factors – and particularly now Vladimir Putin’s war on Ukraine has highlighted the importance of the UK having more indigenous sources of energy.
The UK’s biggest water supplier has been dealt another blow as the regulator decided to reduce its income.
Thames Water, which supplies 16 million people in England, has been told by the watchdog Ofwat its revenues will be cut by more than £187m.
It comes as the utility struggles under a £17.6bn debt pile and the government has lined up insolvency practitioners for its potential collapse.
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Overall, water firms face a sector-wide revenue reduction of nearly £309m as a result of Ofwat’s determination. Thames Water’s £187.1m cut is the largest revenue reduction.
This will take effect from next year and up to 2030 as part of water companies’ regulator-approved five-year spending and investment plans.
The downward revenue revision has been made as Ofwat believes the companies will perform better than first thought and therefore require less money.
Better financial performance is ultimately good news for customers.
The change published on Wednesday is a technical update; the initial revenue projections published in December 2024 were based on projected financial performance but after financial results were published in the summer and Ofwat was able to apply these figures.
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Is Thames Water a step closer to nationalisation?
Thames Water and industry body Water UK have been contacted for comment.
A huge takeover that would rock the entertainment industry looks imminent, with Netflix and Paramount fighting over Warner Bros Discovery (WBD).
Streaming giant Netflix announced it had agreed a $72bn (£54bn) deal for WBD’s film and TV studios on 5 December, only for Paramount to sweep in with a $108.4bn (£81bn) bid several days later.
The takeover saga isn’t far removed from a Hollywood plot; with multi-billionaires negotiating in boardrooms, politicians on all sides expressing their fears for the public and the US president looming large, expected to play a significant role.
“Whichever way this deal goes, it will certainly be one of the biggest media deals in history. It will shake up the established TV and film norms and will have global implications,” Sky News’ US correspondent Martha Kelner said on the Trump 100 podcast.
So what do we know about the bids, why are they controversial – and how is Donald Trump involved?
Why is Warner Bros up for sale?
WBD’s board first announced it was open to selling or partly selling the company in October after a summer of hushed speculation.
Back in June, WBD announced its plan to split into two companies: one for its TV, film studios, and HBO Max streaming services, and one for the Discovery element of the business, primarily comprising legacy TV channels that air cartoons, news, and sports.
It came amid the cable industry’s continued struggles at the hands of streaming services, and CEO David Zaslav suggested splitting into two companies would give WBD’s brands the “sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape”.
The company’s long-term strategic initiatives have also been stifled by its estimated $35bn of debt. This wasn’t helped by the WarnerMedia and Discovery merger in 2022, which led to it becoming Warner Bros Discovery.
WBD’s announced it was open to selling or partly selling the company in October. Pic: iStock
What we know about the bids
The $72bn bid from Netflix is for the first division of the business, which would give it the rights to worldwide hits like the Harry Potter and Game of Thrones franchises – and Warner Bros’ extensive back catalogue of movies.
If the deal were to happen, it would not be finalised until the split is complete, and Discovery Global, including channels like CNN, will not form part of the merger.
Paramount’s $108.4bn offer is what’s known as a hostile bid. This means it went directly to shareholders with a cash offer for the entirety of the company, asking them to reject the deal with Netflix.
Ted Sarandos, CEO of Netflix. Pic: Reuters
This deal would involve rival US news channels CBS and CNN being brought under the same parent company.
Netflix’s cash and stock deal is valued at $27.75 (£20.80) per Warner share, giving it a total enterprise value of $82.7bn (£62bn), including debt.
But Paramount says its deal will pay $30 (£22.50) cash per share, representing $18bn (£13.5bn) more in cash than its rivals are offering.
Paramount claims to have tried several times to bid for WBD through its board, but said it launched the hostile bid after hearing of Netflix’s offer because the board had “never engaged meaningfully”.
David Zaslav, CEO and president of Warner Bros Discovery. Pic: Reuters
Why are politicians and experts concerned?
The US government will have a big say on who ultimately buys WBD, as Paramount and Netflix will likely face the Department of Justice’s (DOJ) Antitrust Division, a federal agency which scrutinises business deals to ensure fair competition.
Republicans and Democrats have voiced concerns over the potential monopolisation of streaming and the impact it would have on cinemas if Netflix – already the world’s biggest streaming service by market share – were to take over WBD.
Democratic senator Elizabeth Warren said the deal “would create one massive media giant with control of close to half of the streaming market – threatening to force Americans into higher subscription prices and fewer choices over what and how they watch, while putting American workers at risk”.
Similarly, Representative Pramila Jayapal, who co-chairs the House Monopoly Busters Caucus, called the deal a “nightmare,” adding: “It would mean more price hikes, ads, and cookie-cutter content, less creative control for artists, and lower pay for workers.”
Read more:
Netflix could yet get its way in Trump’s America
Netflix’s business model of prioritising streaming over cinemas has caused consternation in Hollywood.
The screen actors union SAG-AFTRA said the merger “raises many serious questions” for actors, while the Directors Guild of America said it also had “concerns”.
Experts suggest there’s less of a concern with the Paramount deal when it comes to a streaming monopoly, because its Paramount+ service is smaller and has less of an international footprint than Netflix.
How is Trump relevant?
After Netflix announced its bid, the president said of its path to regulatory clearance: “I’ll be involved in that decision.”
And while Mr Trump himself will not be directly involved, he appointed those in the DOJ Antitrust Division, and they have the authority to block or challenge takeovers.
However, his potential influence isn’t sitting well with some experts due to his ties with key players on the Paramount side.
Larry Ellison (centre left) in the White House with Trump. Pic: Reuters
Paramount is run by David Ellison, the son of the Oracle tech billionaire (and world’s second-richest man) Larry Ellison, who is a close ally of Mr Trump.
Additionally, Affinity Partners, an investment firm run by Mr Trump’s son-in-law Jared Kushner, would be investing in the deal.
Also participating would be funds controlled by the governments of three unnamed Persian Gulf countries, widely reported as Saudi Arabia, Abu Dhabi and Qatar – countries the Trump family company has struck deals with this year.
David Ellison, CEO of Paramount Skydance. Pic: Reuters
Critics of the Trump’s administration has accused it of being transactional, with the president known to hold grudges over those who are critical of him, however, Mr Trump told reporters on 8 December that he has not spoken with Mr Kushner about WBD, adding that neither Netflix nor Paramount “are friends of mine”.
John Mayo, an antitrust expert at Georgetown University, suggested the scrutiny by the Antitrust Division would be serious whichever offer is approved by shareholders, and that he thinks experts there will keep partisanship out of their decisions despite the politically charged atmosphere.
What happens next?
WBD must now advise shareholders whether Paramount’s offer constitutes a superior offer by 22 December.
If the company decides that Paramount’s offer is superior, Netflix would have the opportunity to match or beat it.
WBD would have to pay Netflix a termination fee of $2.8bn (£2.10bn) if it decides to scrap the deal.
Shareholders have until 8 January 2026 to vote on Paramount’s offer.
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