LONDON/TOKYO -- The U.K. has agreed to finance a nuclear plant that Hitachi aims to construct and launch in the country in the next decade.
The memorandum of understanding comes after Hitachi decided at a May 28 board meeting to continue pursuing a deal to build a two-reactor plant on the Welsh island of Anglesey, at a total cost of more than 3 trillion yen ($27.3 billion). The British government will arrange the entire 2 trillion yen in loans that Hitachi requested, sweetening its offer from a previously proposed 1 trillion yen.
Greg Clark, the U.K.'s secretary of state for business, energy and industry, told parliament on Monday that the U.K. would consider direct investment in the plant and had agreed with Hitachi to enter negotiations on the construction. "This is an important next step for the project," he said.
"Nuclear has an important role to play in the U.K.'s energy future as we transition to the low-carbon economy," Clark said, and the U.K. government "will be considering direct investment alongside Hitachi, Japanese government agencies" and other parties. He stressed the plant's construction and operation would support local employment.
The details of any potential investment arrangement have yet to be released, though the preliminary deal indicates that 900 billion yen to be invested in a nuclear plant development company could be split evenly three ways, between Hitachi and public-private consortiums from the U.K. and Japan.
London was expected to announce the memorandum as early as Monday evening, local time.
The two sides have been haggling over the particulars of the project since April. Hitachi was prepared to exit the undertaking entirely due to the heightened financial risks associated with building reactors. Hitachi Chairman Hiroaki Nakanishi met with British Prime Minister Theresa May in London on May 3.
Hitachi, as well as both the British and Japanese public-private consortiums, are to each put up 150 billion yen as insurance against losses if construction of the plant does not proceed on schedule. The parties are considering adopting bonds that can be converted to capital if such contingencies occur.
Clark emphasized that the final decision to proceed has not been made, and that a "key focus of discussions with Hitachi" will be "achieving lower-cost electricity for consumers."
The price of procuring power from the plant is a big question. Hitachi is asking the British government to set the price at an elevated level to guarantee profitability. But London wishes to avoid a price schedule that could raise electric bills.
Hitachi aims to finalize the decision to build the plant next year. The facility is due to go into operation in the early 2020s. The Japanese company remains highly cautious about the project and will pursue concessions from the U.K. to lessen the risks.
Hitachi and the U.K. will also continue to discuss how liability will be assigned if an accident occurs at the plant. The roster of companies taking part in the public-private consortiums has not yet been set.