French energy giant EDF said on Monday it had clinched a deal worth pound sterling16 billion ($26 billion, 18.9 billion euros) to build Britain's first new nuclear plant for a generation, with Chinese backing.
Nigel Cann (left), site director of Hinkley Point C, with Energy and Climate Change Secretary Ed Davey, David Cameron and Henri Proglioat Hinkley Point on October 21, 2013
EDF has agreed to construct two nuclear reactors at Hinkley Point C, in southwestern England, alongside French nuclear group Areva and Chinese nuclear firms CGNPC and CNNC.
The price of shares in Areva jumped by slightly more than 4.0 percent in initial trading in Paris in reaction to the deal.
"EDF Group and the UK Government have reached in principle an agreement on the key commercial terms for an investment contract of the planned Hinkley Point C nuclear power station," EDF said in a statement.
The project is aimed at providing Britain with secure and reliable low-carbon electricity, and will create thousands of jobs, but the deal is likely to face criticism over the high price that will be paid for electricity.
"As part of our plan to help Britain succeed, after months of negotiation, today we have a deal for the first nuclear power station in a generation to be built in Britain," British Prime Minister David Cameron said in the statement.
"This deal means pound sterling16 billion of investment coming into the country and the creation of 25,000 jobs," said Cameron, who heads a Conservative-Liberal Democrat coalition government.
Areva will construct the two EPRs or European Pressurized Reactors, taking a 10-percent stake in the project.
EDF Group will have a 45-50 percent stake, while China General Nuclear Corporation (CGN) and China National Nuclear Corporation (CNNC) will together take a 30-40 percent stake.
Finance minister George Osborne had paved the way for the deal last week, announcing on a visit to Beijing that Chinese firms would be allowed to invest and take majority stakes in civil nuclear projects in Britain.
Discussions are meanwhile ongoing with other interested parties over the remaining 15-percent share.
Next generation of nuclear power in Britain
"This underlines the confidence there is in Britain and makes clear that we are very much open for business," added Cameron.
"This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer-term security of supply."
The accord also agrees a guaranteed price for the energy produced by the two reactors, which had been a major sticking point in the negotiations between the firm and the government.
The agreed price for the electricity provided is pound sterling92.50 per megawatt hour -- which is about double the prevailing rate in Britain.
However, the price could fall to pound sterling89.50 per megawatt hour, if EDF's plans for two nuclear reactors in Sizewell, on the eastern English coast in Suffolk, get the green light.
At full capacity, the two new reactors will be able to produce seven percent of Britain's electricity, enough to power five million homes.
If the deal is confirmed next year, the power station, in south-west England, will be operational by 2023.
Deal boosts jobs 'on both sides of Channel'
"The agreement in principle reached today with the British Government significantly strengthens the industrial and energy co-operation between France and the United Kingdom," added EDF group chairman and chief executive Henri Proglio.
"The EPR project at Hinkley Point represents a great opportunity for the French nuclear industry in a context of a renewal of competencies.
"This project will deliver a boost to the economy and create job opportunities on both sides of the Channel."
The announcement meanwhile comes amid a growing political row in Britain over the soaring cost of domestic electricity and gas, following recent price increases from two major energy providers.
The Archbishop of Canterbury Justin Welby and Deputy Prime Minister Nick Clegg both expressed concerns at high domestic energy prices on Sunday.
Ed Miliband, leader of the main opposition Labour party, has vowed to freeze domestic energy prices for 20 months if he wins the next general election in 2015, as part of efforts to combat what he calls a "cost of living crisis" in Britain.
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