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EDF asks to trigger force majeure clause in Hinkley Point C contract to allow for Covid delays

EDF wants to avoid missing out on billions of pounds in guaranteed revenue from Hinkley Point C by agreeing with the government that delays caused by the Covid-19 pandemic were due to it being a "force majeure".

The French utility, which has its UK base in Gloucester, wants the Low Carbon Contracts Company (LCCC), a government-owned body that administers energy agreements, to trigger the clause in its contract so dates can be pushed back without penalty. The commonly used clause frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing.

The contract for Hinkley Point C in Somerset was signed in 2016 and work started later that year. It is the first new nuclear power station under construction in the UK in almost 30 years and on completion will supply low carbon electricity to around six million homes.

In May EDF announced that the first of Hinkley's two reactors would not be completed until June 2027, 18 months behind schedule. It attributed 12 months of the delay to Covid-related problems when it had to reduce staff on site from 5,000 to 1,500.

The company cautioned there was the possibility of a further 15-month delay to September 2028, and said the date could slip again if there was another wave of pandemic or there were knock-on effects from the war in Ukraine.

An article by the Financial Times this week said analysts estimated one year of lost revenue would be worth £3billion based on 2022 prices. The subsidy deal guarantees EDF a price of £92.50 for every megawatt hour of electricity it produces, for the first 35 years of its life. The revenue would be split with its junior partner on the scheme, Chinese state-owned CGN.

However, if Hinkley is not generating electricity by May 2029, EDF would lose one year of guaranteed payments for every year of delay up to 2033. If the delays extended beyond that date the government has the option to terminate the subsidy contract.

Stuart Crooks, Hinkley Point C's managing director, told the Financial Times about a third of May's revision to the budget was Covid-related. About £500mn was down to performance being "less than we would expect", he added. The other cost overruns were due to issues such as the completion of some of the outstanding design work and a failure to accurately estimate the quantities of materials, such as the number of bolts needed, to complete the build.

The article claimed EDF was trying to amend its contract.

However, a spokesperson for EDF told Punchline that was incorrect and it had simply asked the LCCC to trigger the existing force majeure clause in its contract. It has not had a direct response from the LCCC as yet.

In a statement, the LCCC said it recognised that the pandemic was "capable of being a force majeure event" under the contract. But it added that conditions for granting relief on that basis included the requirement on EDF to "use reasonable endeavours to mitigate the effects of the force majeure (including any delays to the project) and to resume the performance of its obligations under the [contract] as far as reasonably practicable."

Earlier this month EDF announced workers at Hinkley Point C were precision placing 5,000-tonne cooling-water intakes on the seabed.

Four times longer and twice as high as a double-decker bus, the intake heads will cap five miles of tunnels used to supply the two nuclear reactors with cooling water.

The heads are big to allow water to enter the intakes slowly, reducing the number of fish entering the cooling pipes. They are also placed sideways to the tidal flow, while screens and a return system will transfer fish back to sea.

Hinkley Point C will be the first power station around the Bristol Channel to have fish protection measures in place.

Ian Beaumont, project director of Marine Civils at Hinkley Point C said: "This starts a summer of complex offshore operations, with teams working in collaboration to deliver an incredible feat of engineering.

"It demonstrates the continued progress being made at Hinkley Point C."

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