Herbert Smith Freehills has advised long-standing client EDF Energy on the agreement of the contract to build the UK's first nuclear power plant for a generation – with the development of two European Pressurised Reactors at the Hinkley Point C site in Somerset.

The announcement by EDF Energy and the UK Government of an agreement in principle on the key commercial terms for the first of a kind, market leading and bespoke HPC Investment Contract follows complex negotiations between the parties over the previous two and a half years, and agreement in the context of development of the Government's Electricity Market Reform programme.  A key plank of EMR will be the Contracts for Difference, which will replace the current Renewables Obligation as the UK's primary mechanism to incentivise investment in low carbon generation.

Julia Pyke, Herbert Smith Freehills' partner and co-head of Nuclear has been leading a cross-practice London-based team on the project.  Support on negotiation of the HPC Investment Contract has been provided by associates Matthew Warren and Shekhar Sumit.  Lode Van Den Hende, Partner, and Michael Sanchez-Rydelski, Of Counsel (both Herbert Smith Freehills' Brussels) have been advising EDF Energy in relation to State aid.

Julia Pyke commented: "We are delighted for EDF Energy that all its hard work over the last few years has achieved this significant stage.  Getting a project of this size and complexity to its current milestone is a huge achievement for all involved.  The UK Government's policy of encouraging low carbon power sources and greater self-sufficiency in energy generation will be bolstered by the agreement of this contract."

The HPC Investment Contract is an early stage Contract for Difference which will underpin the development of the HPC project by providing revenue stabilisation and investment protection through a bilateral contract entered into with the Secretary of State (and subsequently a public-sector Counterparty) and funded by electricity suppliers, and it is expected that a significant amount of project debt will be guaranteed by Infrastructure UK.

HPC will be the third nuclear plant at the Somerset site, with the two EPR reactors having an expected capacity of 3.2GW, sufficient to provide power to five million homes throughout the UK.  Hinkley Point A, which is now being decommissioned, began generating in 1965 and was closed down in 1999.   Hinkley Point B, which started generating in 1976, is due to be turned off in 2023.  The last nuclear plant built in the UK was Sizewell B in Suffolk, completed in 1995.

Mark Newbery, global head of energy at Herbert Smith Freehills added: "We are delighted to have advised EDF on the latest phase of this high-profile and strategically-important project.  Today's announcement marks a significant step forward for both the project and the wider industry, while showcasing the strength and breadth of Herbert Smith Freehills' offering for international energy companies such as EDF."

Since 2006, Herbert Smith Freehills has provided advice to EDF Energy on all aspects of its new nuclear plans, including energy, regulatory and corporate law, planning, real estate, environment, construction, finance, EU/State aid, competition and public law.

In addition to advising on the HPC Investment Contract, significant developments on the HPC project this year on which Herbert Smith Freehills' have supported EDF Energy include:

    grant of the Development Consent Order (DCO) for HPC (the first for a nuclear new build site in the UK), Matthew White, Partner, Catherine Howard, Senior Associate and Charlotte Dyer, Associate
    submission of NNB's Funded Decommissioning Programme to the UK Government (the first arrangement of its kind in the UK), Julia Pyke, Paul Butcher, Of Counsel and Hannah Roscoe, Associate
    the on-going negotiations with IUK in relation to the proposed UK Guarantee covering a significant percentage of the expected project costs prior to operations, Matthew Job, Partner and Helena Anderson, Senior Associate, and,
    the current negotiations with other potential investors regarding possible equity investment into NNB (including AREVA, China General Nuclear Corporation, China National Nuclear Corporation) Julia Pyke and Gavin Williams, Senior Associate