Hinkley Point C Funded Decommissioning Programme
The Government announced that the FDP for Hinkley Point C had been conditionally approved on 21 October 2015, subject to the Contract for Difference being executed and coming into legal effect.
Waste and decommissioning costs for Hinkley Point C have been accounted for in the Strike Price (some £2MWh). The operator will pay a higher proportion of the Strike Price into their FDP fund if costs go up; but will benefit if they manage costs effectively.
Funded Decommissioning Programme Regime
The Funded Decommissioning Programme (FDP) ensures that the developer will meet the costs of decommissioning the plant and managing and disposing of its waste so that the taxpayer does not to bear the burden of these costs in future.
Under the Energy Act 2008 operators of new nuclear power stations are required to have secure financing arrangements in place to meet the full costs of decommissioning and their full share of waste management and disposal costs. These arrangements are set out in a FDP.
The FDP has been approved by the Secretary of State in accordance with the requirements of the Energy Act 2008. It comprises of:
a Decommissioning and Waste Management Plan (DWMP), which sets out the operator’s costed plans for dealing with its liabilities (covering decommissioning, waste management and waste disposal). The plan will be reviewed and updated at least every five years and each updated plan will be independently verified.
a Funding Arrangements Plan (FAP), which sets out how the operator will make financial provision to meet its liabilities. It is in the form of a contract between the operator and the independent fund company that has been set up to hold monies for the plant’s decommissioning and clean up. The FAP sets out the roles and responsibilities of the fund and how payments to the fund will be calculated and explains how the priority of FDP payments is achieved over payments to investors.
The FDP is supported by a range of associated agreements and contracts:
These contracts set out the terms on which the Government will take title to and liability for the spent fuel and intermediate level waste (ILW) from Hinkley Point C once it has been decommissioned.
The Government expects to dispose of the ILW and spent fuel from Hinkley Point C in a geological disposal facility that will be constructed for the disposal of waste. The waste transfer contracts (WTCs) set out how the price for this disposal service will be determined. This is in line with the Government’s published Waste Transfer Pricing Methodology.
WTCs are required for the operator to demonstrate they have a viable waste disposal route in place. The operator is required to set out in its FDP how it will make prudent provision for its liabilities under the WTCs.
Section 46 Agreement
This agreement sets out the extent to which the Secretary of State may and may not exercise his powers to modify the FDP, thereby providing greater clarity to investors.
Deed of Undertaking
This document sits alongside the Section 46 Agreement and provides that the Secretary of State will not to use his powers under the Energy Act 2008 to modify the FDP in order to impose obligations on “associated persons”, i.e. shareholders or other investors in the project in order to give greater investor clarity.
This is an agreement between the Secretary of State and EDF in relation to the security interests granted in accordance with the FAP.
It provides that in circumstances where the operator is in financial difficulty there will be a standstill period of up to 12 months, in which the Secretary of State is unable to enforce the security provided to the Secretary of State through the FDP, so long as certain conditions are met, in particular that no payments are made to debt or equity during the same period.
Nuclear Liabilities Financing Assurance Board (NLFAB) Advice and cover letter
NLFAB is an independent advisory body established to provide impartial scrutiny and advice to the Secretary of State on the suitability of the financial aspects of the FDP.
NLFAB’s advice on EDF’s FAP concludes that “the FAP makes prudent provision for the financing of the designated technical matters and meets the Objective and Guiding Factors (the Guiding Factors) set out in the FDP Guidance.