French electricity company Electricite de France SA and the British government are unlikely to meet a deadline at the end of March to agree on subsidies that would allow the construction of new nuclear power plants in the U.K., people familiar with the matter said.
The people said in recent days that although discussions are still ongoing, they aren't intensive and neither side appeared to be willing to make any compromises.
"There's no deal in sight, discussions are ongoing and if EDF doesn't get the price that it believes is the right price then they won't do it, they have no choice," said one person familiar with the matter. A second person familiar with the matter said nothing had changed in recent weeks to suggest that an agreement between the two sides was imminent.
"It wouldn't surprise me if it ended up being the summer--that's the most likely timing for an agreement. Everyone's waiting to see who will blink first," the second person said.
Reaching agreement on a subsidy, or guaranteed electricity price, with the U.K. government is crucial for the success of EDF's project, as it would give the French utility and any other potential investors certainty on future revenue from new power plants. This then would allow them to make their final investment decisions on the project, which could cost around 14 billion British pounds ($21.3 billion) for two reactors.
An agreement would also make it easier to bring additional partners into the project to share the construction risk, the people said.
One of the potential partners EDF is talking to is China Guangdong Nuclear Power Holding Co.
Delays to the project would be a setback for the U.K. government, which wants to replace aging coal-burning and nuclear plants that will be retired over the next few years.
EDF, which has been spearheading the U.K.'s nuclear revival, originally said it expected to make the final investment decision on the Hinkley Point project in southwest England by the end of 2012. The company later revised that to the end of the first quarter of this year.
In February, Centrica PLC pulled out of the partnership it had with EDF to build new plants, citing uncertainty over overall project costs and the construction schedule. German utilities RWE AG and E.ON AG withdrew from the U.K. nuclear market last year.
In addition to cost pressures, plans to build up to eight nuclear reactors in the U.K. have faced stiff opposition from environmental activists. The Fukushima nuclear disaster in Japan in 2011 forced the U.K. government to review safety standards and raised costs further.
These problems have already pushed back the start date of EDF's planned 1.65-gigawatt Hinkley Point nuclear power project, which was originally expected to start operating in 2018, but is now unlikely to do so before 2020.