TOKYO -- The British government has proposed to arrange all 2 trillion yen ($18.2 billion) in lending that Hitachi says is needed to build a nuclear power plant in Wales, as the Japanese side seeks to reduce its risk and encourage the U.K. to put more skin in the game.
London had previously suggested that it guarantee 1 trillion yen in lending, but to get the project moving it changed its offer to include approaches such as direct financing in order to reduce Hitachi's financial exposure. The plan also calls for a total investment of 900 billion yen, with Hitachi as well as Japanese and British public-private interests each taking a one-third stake, and guarantees for corporate loans.
The total cost of the plant, to be built on the Isle of Anglesey, is expected to swell to 3 trillion yen.
Hitachi Chairman Hiroaki Nakanishi met with Prime Minister Theresa May in London last Thursday to ask for greater backing. The original plan called for the loans to be provided by private lending institutions from both countries and guaranteed equally by each government.
State funding would come at a lower cost than borrowing from private institutions and would demonstrate the U.K.'s increased involvement as a backer of Hitachi's nuclear power business, which would ease raising funds and help secure investors.
The offer reflects the U.K.'s strong desire to proceed with the project, since bankruptcy could place a burden on British taxpayers.
The U.K. government will submit a formal proposal to the Japanese side soon. Hitachi will then make a final decision on whether to continue with the project at a board meeting at the end of the month.
Some at Hitachi and in Tokyo have expressed concern about Japanese interests retaining leadership of the project with two-thirds control. Hitachi and the U.K. are thought to be discussing ways to prevent Hitachi's exposure risk from rising, such as by raising London's stake or issuing dual class shares.
But the British Parliament is likely to oppose expanding the government's stake, which could throw a wrench in the project's final shareholding structure or allocation of costs.
Hitachi is also requesting that the electricity's purchase price be raised, but the U.K. is opposed. It hopes to satisfy Hitachi by covering all loans and raising its stake in the project.
The plant is slated to begin operations in the early 2020s. Hitachi has already invested about 200 billion yen in reactor designs and construction preparations after acquiring complete ownership of Britain's Horizon Nuclear Power for 89 billion yen in 2012.
The project is in its final preconstruction phase and is scheduled to break ground next year. Hitachi must start construction by then to remove the project from its books.