Japan’s Hitachi Ltd (6501.T) decided on Thursday to freeze a 3 trillion yen ($28 billion) nuclear power project in Britain, dealing a blow to UK plans for the replacement of aging plants.
Hitachi’s UK unit Horizon Nuclear Power failed to find private investors for its plan to build a plant in Anglesey, Wales, which was expected to provide about 6 percent of Britain’s electricity.
“We’ve made the decision to freeze the project from the economic standpoint as a private company,” Hitachi said, adding that it had booked a write-down of 300 billion yen.
Hitachi chief executive Toshiaki Higashihara said the company could seek to withdraw completely from the project and sell the Horizon unit, depending on discussions with the British government.
Hitachi shares have risen 13 percent since Japanese media first reported the possible suspension last week.
The Japanese company had urged the UK government to boost financial support for the planned power station.
Higashihara, however, denied that turmoil over Britain’s impending exit from the European Union had any impact on Hitachi’s decision to freeze the project. People close to the matter had previously said it had limited the government’s capacity to devise plans.
The withdrawal of the Japanese conglomerate could leave the nuclear newbuild industry open to Russian and Chinese state-owned companies as Western private firms struggle to compete.
China’s General Nuclear Services, an industrial partnership between China General Nuclear Power Corp (CGN) and French utility EDF (EDF.PA), plans to make a number of investments in Britain’s nuclear power sector, most notably the Hinkley Point C project in southwest England.
China’s CGN told Reuters it would bring forward plans to build a nuclear plant in Bradwell, eastern England, helping to plug a potential supply gap.
British Energy Secretary Greg Clark said the government would explore different options for funding new nuclear plants, as costs for renewable energy had fallen so sharply it was difficult to justify higher subsidies.
One option is a regulated asset-based model, under which investors receive some of the funding for projects as they are developed, rather than the contract-for-difference model, which provides funding only when electricity generation has begun.
The government will give an update on this assessment during summer.
Britain wants new nuclear plants to help replace its aging fleet of nuclear and coal plants coming offline in the 2020s, but high up-front costs have deterred construction.
Another Japanese firm, Toshiba Corp (6502.T), scrapped its British NuGen project last year after its U.S. reactor unit Westinghouse went bankrupt and it failed to find a buyer.
Horizon Nuclear Power said it could resume development at Anglesey in the future. The project, which was slated for completion in the late 2020s, had approval for the nuclear reactor design but had not yet started construction.
Mycle Schneider, publisher of the World Nuclear Industry Status Report, said the Hitachi decision was a consequence of changing energy economics.
The investment would not even be able to compete with unsubsidized offshore wind, the most expensive renewable energy technology, Schneider said.
“Time for the UK government to come up with a plan B,” Schneider added.