Welcome to this session of the Public Accounts Committee on Monday 8 June 2026. Sizewell C is one of the largest infrastructure projects currently under development in the UK. It is a major part of the Government’s ambition to reach net zero by 2050 and is expected to generate enough electricity for about 6 million homes from when it begins in 2038. The project also represents a substantial financial commitment, with an estimated cost of £38.2 billion, financed largely by Government, using a novel financing and delivery model, which shares the cost between taxpayers, consumers and the private sector. However, large nuclear projects have historically faced significant delivery challenges, and no comparable nuclear power station has been completed without lengthy delays or cost overruns, with Hinkley C being a notable example of this. So today the Committee will examine the value for money of building a new nuclear power station at Sizewell, whether the financial and delivery risks are being effectively managed and whether the Government are doing enough to protect the interests of consumers and taxpayers. In a minute, I am going to ask you all to introduce yourselves briefly. Have any of you attended the Committee before? Jonathan of course has and Clive many times. I particularly welcome George Osborne from the Treasury team. The Treasury team do a great deal of work behind the scenes for these Committees and are always available to answer on public sector money rules and other matters. Without further ado, I am going to start with you, Jonathan. Will you please introduce yourself and say when you were appointed to this post and briefly what your role is?

I am Jonathan Brearley, permanent secretary, appointed in March this year to DESNZ.

I am Clive Maxwell, the Department’s second permanent secretary. I am a shareholder non-exec director in the holding company for Sizewell C.

I am Caroline Botwood, director of nuclear projects delivery. I was SRO of the Sizewell C project up until the financial investment decision and now sit as the shareholder non-executive director on the GenCo board of Sizewell.

I am Nigel Cann, CEO of Sizewell C. I have been in post since January. Prior to that, I had been the joint managing director since April 2023.

And you are the accounting officer for this project.

I am also the accounting officer, yes.

I am Joseph Rippon, deputy treasury director at Sizewell. I have been at Sizewell since 2018 and, from a Sizewell perspective, I led on the development of the funding and financing arrangements that have been put in place.

Thank you all very much. A particular welcome to those who are appearing before the Committee for the first time. On this occasion, it falls to me to ask the first question—to Jonathan, please. Why are you confident that Sizewell C will generate value for money, when renewables produce cheaper electricity?

It is worth looking at a couple pieces of context before we get into the detail. First, the energy sector has had a nuclear component for decades. That has been part of the backbone of the energy system up until now. As we know, that is now declining, but also as we know, we are in a major transition. We are seeing not only a diversification of sources of electricity, including renewables, but different parts of the economy beginning to rely on the electricity sector, most notably transport and domestic heating, as well as some industrial uses. We are seeing a massive increase in demand. Renewables have many strengths and some renewables may be cheaper in their generation costs, but in trying to get a balanced portfolio—that means we have electricity available when we need it, including those days when renewables are not generating—we think that nuclear is an important component of the mix. To give you an assessment of how we think about it, we do not think just about the cost of a power station, but about the cost of the system as a whole. The critical thing for me is that Sizewell, as delivered, will deliver a benefit of about £2 billion a year in reduced system costs overall.

We have many questions about financing and everything else to come to, but one of the elephants in the room seems to be decommissioning. The Committee has done a lot of work on that, and we know that the costs nearly always overrun the estimates. One of our pieces of evidence said that the decommissioning costs, on today’s prices, could be up to £12 billion. What work have you done on that?

Caroline, do you want to talk about that?

There is a funded decommissioning plan, which is one of the building blocks of the RAB, as figure 8 in the Report, the table, shows you. It is funded from day one of operations, over time. There is the ability to review that every five years, as part of the regulatory review. The funded decommissioning plan was reported to Parliament as one of our contingent liabilities, I think in September ’25. We believe it went through an awful lot of assurance as to its costs, so it is robust, but it certainly will not come as a surprise at the end—this should be in figure 8—

I think it is figure 7.

Yes, or figure 8 on the next page. You can see that the funded decommissioning programme is part of the make-up of the RAB.

That figure on page 36 puts the decommissioning programme between £5.1 billion and £5.8 billion nominal, or £2.3 billion to £2.5 billion real. How much is that based on the Government’s experience of what actually happened with, for example, the cost of decommissioning the AGR reactors? We have seen all the stuff that ends up in Sellafield and the enormous liability that Sellafield has built up. How much is that figure really based on proper and real comparisons?

It has been subject to extensive due diligence, not least by our investors, the rating agencies and the lenders, because as it is part of the RAB, part of their returns depends on getting that right. It has been subject to a lot of work.

This is my final question, because I will then pass over to my deputy, Clive Betts. If, as I am hinting, that underestimates the cost, the total liability or excess cost will fall on the Government and consumers, won’t it?

It will fall on consumers.

The consumer is going to pay more for electricity from Sizewell C than from Hinkley Point C. It looks as though things are getting worse rather than better for the consumers, doesn’t it?

You have to remember when Hinkley was built and the conditions it was built under. One of our biggest changes—my colleagues may come on to this in more detail in a second—is that financing costs have changed. Hinkley was built at a time when financing costs were far more attractive than they are today. The global context has changed. Equally, clearly we have seen what has happened to Hinkley, so there is a much more realistic cost assessment. I am sure we will come on to this, but one of the reasons why we are more confident about Sizewell is that we have done a lot more work to understand the plans and the costs involved. The situation has changed, but ultimately it has changed because of the context around us, as well as of the experience that we have had so far.

Is it simply a matter of the financing costs, permanent secretary?

No, it’s financing costs plus the additional experience that we have had from Hinkley in terms of the cost differentials.

The underlying risk rate—the gilt rate—was significantly lower when the Hinkley deal was done than when the Sizewell deal was done. Nobody can do anything about that; that was just the fact of it. However, if you adjust the cost of capital for Sizewell C for the underlying rate that was used on HPC and include the benefit of the RAB, which includes the benefit of cheap debt—Hinkley only had equity—on pure cost terms, in a comparable way Sizewell C would be five percentage points cheaper. It is an accident of timing when you do these things that does it. The other big difference is that with HPC, the CfD price was struck on a very immature cost basis. We have a much more mature cost basis for Sizewell. Although our estimate is that Sizewell will come in at 22% less than the current cost of HPC compared to the cost that was assumed back in 2015, that is not directly comparable.

I have a particular interest in Hinkley Point C because it is in my constituency and I have had a degree of relationship with them. Are you saying that the costings around Hinkley Point C were either naive or incompetent, or was it just a matter of timings?

The original costings of Hinkley Point C have turned out not to be the correct ones.

How did that happen?

I think that is a matter for EDF to discuss. They are the operators; they are the builders of Hinkley Point C. The deal that was struck by the Government was on the basis of those early immature costings, which actually represent a good deal for consumers.

As the NAO Report says, when you look at why we have confidence in Sizewell, it is because we have taken more time and we have far more mature designs than we had for Hinkley at the time. That is one of the reasons why we think that this project—accepting that there is always a risk with these projects—is in as good shape as it can be at this stage.

Nigel might be able to say more, but I think—

As is recognised in the Report, Sizewell costs 22% less in the construction than Hinkley Point. The point was raised about why Hinkley’s cost estimate was so immature at the start. It was because they had not completed the design; I mean, there were 7,000 design changes that they had to do. The quantities were immature; the whole cost estimate was immature; the time was immature. Also, they suffered through the covid period as well. If you start to peel back the actual engineering costs, the loss of time and the loss of confidence from Hinkley, that is all the advantages that Sizewell has got. We start off with an 85% mature design, a really good bill of quantities, a really good cost estimate and a really realistic range of risk.

You say immature; I say naive. Isn’t that quite a damning assessment that you have just delivered to this Committee on Hinkley Point C?

I would go back to two things for customers. The difference is that this is a matter for EDF, and EDF is funding those cost overruns. Ultimately, customers are on a different system there and notionally have a fixed price for that. Secondly, nuclear projects are always challenging. That is why we have made sure this time that we learn the lessons, not just from Hinkley and any predecessors of Hinkley where there have been issues, but also from other major projects. That is why, when we come on to it, I think that we have not only the right time to make this decision but the right regulatory structure and governance structure around it.

Permanent secretary, you said that we are going for nuclear because of the issues with baseload and certainty of delivery of supply. But there is another form of nuclear, isn’t there, that is coming on stream: small modular reactors. With them, there is a lot more flexibility and a lot less commitment to one mega-project that can slip or go wrong. Why go for this scale of reactors when SMRs look as though they are going to be the future?

I would say one thing: I am a massive personal enthusiast for SMRs. I think they have potentially a big role to play and I was delighted when we signed the agreement with Rolls-Royce. But right now we need to have a portfolio of technologies in the system. If we put all our eggs in any basket, I think we are basically in a situation where we are not diversifying our risk. My view is that we need some of these major projects like Sizewell, but we also need SMRs.

Let’s come on to SMRs then. One of the things that does not appear to be important in any of your evaluations is not merely the immediate cost to the taxpayer or consumer, but the wider benefits to the economy of delivering projects with a large UK component, in terms of jobs and manufacturing. EDF is going to source everything from France, is it not? There will be no add-on benefit to the UK economy and UK workers.

We have big ambitions for UK content and for UK workers. I will ask Nigel to explain how they are going about it, but we think both of these investments—SMRs and major projects—will deliver significant economic benefits for the country.

Perhaps you could say a bit about SMRs, because I am not sure that has been covered.

As you may know, we have a 70% ambition for SMRs.

It is 70%, but Rolls-Royce has just agreed to source the key, highly specialist components of their reactors from Korea. You have a state-owned company in Sheffield Forgemasters—Government have just put in £1 billion of investment—sitting there with the capacity and the skills, and yet Rolls is sourcing those very components abroad. That is not Government taking charge, is it?

As I say, we have a 70% ambition for SMRs to be sourced locally. Nigel can talk a bit about—

But having an ambition and doing it are two different things, aren’t they?

Absolutely, and we are working hard to make that happen.

I have a simple question arising from Clive’s question. What percentage of the total work share do you expect the UK to produce on Sizewell C?

Sizewell C will spend 70% of its overall costs with UK companies. Currently, we have 1,000 UK companies signed up. We also have commitments to the various regions. In Suffolk and the east of England, we expect to spend around £4 billion. We have already committed £1 billion, so there is significant engagement. There has been fantastic work with the chamber of commerce there to engage local businesses. We have done lots of speed dating with local supply chain and tier 1 contractors, which has been very successful. To the point raised earlier, we are doing some work with Sheffield Forgemasters. We are helping them with a qualification of some of our big valve castings. Obviously, there is a nuclear code that needs to be respected. We are trying to make sure that Sheffield Forgemasters really benefits from Sizewell in getting itself ready to compete with others for future projects.

The estimate we have for Sizewell is 17,000 direct and indirect jobs at peak construction.

But it is about what sort of jobs, isn’t it? If it is laying the tarmac in the drive up to the plant, it is very different from producing the key components.

We have committed to 1,500 apprentices. We are on our 124th. Those range across the whole of the skill trade set, and we have professional apprentices as well. We are taking people through degree-level apprenticeships. We are very minded of the fact that we do not just want bus drivers and cooks. We want fully qualified electricians. I started my life as an apprenticeship electrician, so I am quite passionate about that. We will offer opportunities that only big infrastructure can.

Chair, I think it would be very helpful to have a detailed note about precisely what jobs are going to be created, what components are going to be sourced from the UK, what certainty there is, and what leverage—what controls—you have to make sure that happens, for both Sizewell and SMRs.

I want to clarify this 70% work share. To keep the maths easier, we expect this to cost £40 billion—hopefully less than £40 billion. You are saying that 70% of the work share, so £28 billion-worth of the value of Sizewell C, will be spent in the UK. Is that correct?

With UK companies—yes.

Why did you invest £5 billion that the taxpayers could have lost prior even to making a deal?

You have to develop these projects to a certain level. As we have learned from previous major projects and previous nuclear projects, without getting to that level of maturity, you do not have the confidence over deliverability and cost. That is why we spent the money we did to get there. Caroline and Clive may want to come in on the details of what we spent, but that was the reason to get there.

It was very much about maturing the project over that period while it was not yet ready to go through the final investment decision and financial close. That gave an opportunity to progress further with the design work and contracting strategies, putting the project in a better place.

It might be helpful to ask Nigel about the delivery confidence.

Some of this is all about momentum. If you look at various reports, such as the Stewart report, they will tell you that if you do not have all your permissions in place—your environmental permits, your planning permissions—it is very difficult to get momentum in these projects, and the cost and schedule become very uncertain. We triggered our development consent order before the final investment decision, really to create that momentum of building local infrastructure. There were two big components to it: first, to de-risk the project by getting as many environmental permits as we could and getting as many planning conditions cleared as we could; and, secondly, to minimise the impact on local people by getting all the road and rail infrastructure in as quickly as possible. If we are going to meet our ambitions around cost and schedule, it is really important to get that logistical infrastructure in place as quickly as possible, as well as minimising the impact on the local community.

At the moment we are working closely, from a planning point of view, with the local council—the county council, as it currently stands—but we are also working with the regulators, and with the Environment Agency especially we have a good relationship. We are looking at things in a very pragmatic way and dealing with some of the challenges and getting the permits to make sure we hit the schedule. At the moment, we have not had any issues where a permit has been holding up the schedule.

Actually, the delay was more around getting the financing away, getting the approvals away and absorbing a six-month change in Parliament. The 28 months was to do with external factors. The project powered on and was not subject to any delay at all during that period.

And I would argue that the benefit of having contractualised the project, gone through that final investment decision and kicked off the RAB is that there are very strict schedule and budget incentive structures around the investors, including the Government, in the project as it now stands, which did not exist before that final investment decision.

I think there was insufficient market appetite in the private sector, among either funders or developers, to take on the entirety of the development and build, so the CfD model that was used for Hinkley was no longer available. The NAO very helpfully sets out the history in the Report, which shows a number of developers dropping away at quite large cost because they were not able to pursue it. The RAB approach—that is, with a different sharing mechanism—was a direct response to that failure to get away with just a CfD.

Sadly, I am old enough to have been around for the first Hinkley contract and the NAO Report that followed it. The reflection was that a more flexible structure would ultimately deliver better value for money for customers, and I think we endorse that.

It also about value for money, though; it is about getting this away at the best value. It is the price they would charge to invest. I think that we all reflected, particularly with the NAO’s reflections afterwards—many people were involved in the original Hinkley CfD—that, ultimately, this would be a better structure to deliver that value.

I will talk a bit about the Sizewell decision and my colleagues can talk about the wider use of EPR2. Part of the benefit of Sizewell is the replication of the supply chain, the design and the skills that were used in Hinkley, for example. That is a big part of the value for money case here: you can transfer those across. Equally, the time it would take to bring in the new design means that it would not be feasible for us to meet the needs that customers have. We can talk a bit about EPR2 and the merits of it, but ultimately that is what led to this decision. It is also worth saying that we are in a process of more strategically planning the whole of the supply that we need, and that will give us a much clearer indication of what nuclear we need in the future.

Obviously, this is a decision for EDF, but if you look at the whole premise of the EPR2 programme, it is based on six units. They accept that the first one will take a long time and cost quite a bit of money, so they are only really replicating what we are trying to do here in the UK: we built the first one with 7,000 design changes and now we are building the next two, which are 22% cheaper. The whole EPR2 model in France is really to take the French fleet forward, with the acceptance that the first one costs a lot of money and, by the time you get to the sixth one, it is much cheaper and takes much less time to develop. When you look at the overall quantities of EPR2, it is the same as ours. The concrete quantity is the same, the steel quantity is the same; all the quantities are the same.

It has three trains, but the trains are just slightly bigger. Honestly, when you look at it in detail, the quantities are not much different from what we are building. It is not half the size or half the weight; from a quantities point of view, it is very similar.

When you look at the decision that was taken to go to the final investment decision on Sizewell C, the NAO Report sets out very clearly the potential benefits of replication, and none of those would have been available if we had been using a different design here in the UK. The second, very practical point is that there was not a proposal on the table for an EPR2 option. This was the project we could take a decision on, which we needed for the reasons Jonathan set out at the beginning around making sure that we have the power in the future for what is needed in the country. That was the option on the table.

Again, if you look at the EPR2 programme, which is a six-unit programme, they are trying to do exactly the same as what we are planning to do at Sizewell. If you look at Hinkley, one of the reasons that it took a long time to build the first unit was that they were waiting for design, they couldn’t do a lot of pre-construction planning, they couldn’t modulise, they couldn’t pre-cast. When you look at the unit 1 to unit 2 story at Hinkley, they are doing four times as much pre-cast as they did on unit 1. We plan to do about 10 times more pre-cast than they did on unit 2. That whole programme of work allows you time to optimise your construction sequence and construction methodology to make sure that you get the most cost and schedule efficiency you can. The EPR2 programme is just taking that across six units.

To be clear from a Government perspective, we are not ruling it out—what we do in the future is still something we will need to work through—but the decision for Sizewell at that time we think was the right one.

Is there anywhere in the world where an EPR has been built on time and on budget? Are there any working anywhere in the world? If the answers to those questions are no, how are you so confident that we are going to get this thing delivered for the lower regulatory cost and on time?

At the moment, there are four EPRs operational across the globe: two in China, one in Finland and one in France. It is fair to say that the Chinese reactor builds have been the most successful, and their programme of delivery pretty much matches where we are against our LRT. The Flamanville and Olkiluoto construction periods were very long, and they had some unique challenges along the way, all of which we tried to learn the lessons from. Mainly, they were around first-of-a-kind design issues and, certainly at Flamanville, lots of quality-related issues that significantly extended the schedule. We have taken all that on board. We have read faults reports, we have read STUK reports, and we have absolutely tried to optimise to ensure that, when we get to Sizewell, we are in the best possible shape to be successful.

You were heavily involved in Hinkley C. Are you confidently saying to this Committee that this is likely to be built on time, given that your stance at the beginning of this hearing was that you are just replicating Hinkley C? Are you confident that this will be built on time, and hopefully at the lower regulatory cost?

Absolutely. We are focused on making sure that we manage risk. It would be naive to say that there is no risk in any big infrastructure project, but if I go back to the cornerstones that make a project successful, they are stable design at the beginning, a very good bill of quantities and a supply chain that has done it before in contract—we plan to have all our equipment contracts signed up by the end of next year. All that gives you confidence that you can deliver a project on time and on budget. Then there is an element of managing your risks. It is a long project—over 10 years—so we absolutely need to focus. I describe my challenges between now and what we call J-zero, which is putting the foundations in for unit 1, as being about retiring the equipment risk by getting as much equipment built and in Orwell, which is our million-square-foot warehouse that we have got ready to go, and retiring the risk in the enabling works. We have to build 11 km of railway and 11 km of road—lots of first-of-a-kind issues—and we have to dig a huge excavation. All that will be retired by 2029. Then, looking forward, it is about managing productivity. The UK currently has a challenge with making sure that productivity rates are high. It is about working with all the bodies concerned, including trade unions and the workforce, making sure that you have enough trained people to do the work, and really optimising productivity. Our big challenge between now and J-zero to make that happen is to modulise as much as possible. We want to take as much welding off site and take as much stuff into factories as we can so that, when we get to the construction on site, it is absolutely optimised. That is the sequence as I see it. That all carries risks, but we have a clear plan to manage them all.

Whose responsibility is it if it does not come in on time and on budget?

As a company, we obviously have a board of directors. Ultimately, as the CEO and accounting officer, I am accountable for ensuring that the project is delivered on time and on cost, within the range that we specified.

We now come to questions on the finance, which is pretty complicated. Why did you go for a minority private sector stake, and all the problems of bringing in the private sector, rather than simply taking a regulatory asset model whereby consumers paid and a debt model whereby Government paid?

We have talked a bit about why the RAB model. That was to make sure that we had a more adaptable model that we thought would share risk and therefore deliver better value for customers overall. Ultimately, we wanted two things. One is to have a Government shareholding so the Government will be involved in the project. Clive and Caroline can talk about the roles they play on the board to make sure that they are protecting the public interest and the Government’s interests. But it is also critical—and this is learning from other projects—that we have the commercial incentives in the right place and the commercial pressure to make sure that Nigel and his team have the support and challenge they need to make sure that this project is a success. We see this as combining the best of the public sector and the private sector to make sure that we deliver something that is commercially driven but also has a strong public interest.

I will say a little bit extra, including what I am seeing from being on the board. For me, the first set of benefits come from involving private investors. It is about having greater clarity around the project and about accountability. Agreeing the way forward with those investors has forced contractualisation of commitments on all sides, which makes change control very difficult; if the project is focused, you are not going to get changes in scope going on without great difficulties. That creates what James Stewart referred to in his report on HS2 as something of a “political buffer” around the programme. It is much more difficult to change things because the Government of the day decides it wants to do something; it is locked into the contract that we are all working to. The second big area is the commercial and cost discipline that those private investors, who want the highest possible rates of return, are going to be imposing on the programme. They have demanded credible, tested cost and delivery baseline information. We had proper vendor due diligence that went through that for their benefit, which the Government could also benefit from. I am seeing the way in which those private investors are making sure that we are taking disciplined decisions on the board. In some cases, as well as challenging the executive about drawing down contingency, for example, I am seeing them look for opportunities to use contingency proactively to find ways to de-risk the programme later on. They are the sorts of decisions that might be more difficult inside Government. The third, wider point is that I believe that a programme like this that has private capital can mobilise expertise on the part of those investors—we are seeing that take place—and insist on the project using market norms and standards about how it is operating, and I think it also helps to attract the right sorts of skilled people into the project knowing that those private investors are there. We can see those sorts of benefits coming through the project at the moment.

Clive, as well as those private investors demanding quite a high return, their return will fall the longer this goes on. The ultimate test for whether a private investor can actually deliver this thing at the lowest regulated price would have been to impose a requirement that they had to invest more the longer it went on. That would have been the real risk, so why did you not negotiate that?

There are requirements up to a certain point. Maybe I will ask Caroline, who was involved in working with those investors, to say a little more.

The HRT—higher regulatory threshold—is an extreme outturn. It is over the circa p90, as I am sure you have heard in this Committee regularly. The investors and the banks have committed within the existing structure to fund up to the HRT. That was a condition of them coming into the deal. What they did require, which we are seeing is no surprise across the market, because a lot of this money comes from funds, is an ultimate cap on that. That does not mean that they will not invest further, because there will be strong incentives on them to invest above HRT in order to get this thing finished—

What will those incentives be?

If they do not, they get very bad dilution. They get squeezed out as other money comes in, either from the Government or from other investors. There will be strong incentives, but there is not an obligation. But we have a fully funded, functioning model up to the HRT, which provides quite a lot of comfort that investors will not just get to the LRT or see things going wrong and then feel they can get out or not work harder at it.

Explain to us the governance of this, because the consumer and the Government are going to pay for the majority of this project—I think 44.9% is where the private sector comes in—yet we are not going to have a say on the governance of exactly how this project is run. Why are we not getting equivalent say for the amount of money that the taxpayer and the consumer are putting into this?

We are getting a say relative to our shareholding in this. It was an active decision that we wanted this board—this company—to address this project as the private sector would, and in the most clear way, over a very long construction period that would cover several Parliaments and several fiscal rounds. We also wanted to keep absolutely focused on making it as cheap and fast as possible, which ultimately protects the consumer. We have gone into that with a 45% shareholding. That gives us veto rights, but it does not give us control. The reason why we have put in such a lot of the debt is so that we can get the benefits of the public sector balance sheet. I am sure you have read elsewhere in the Report that the Government have taken the policy decision to recycle any margin over gilt on their equity and the vast majority of the debt back, to the benefit of the consumer. What you have is a true partnership where we are getting the commercial sector disciplines of a 100% commercial company, with the benefit to the consumer of cheaper funding.

You slightly glossed over it there, didn’t you? On the board, the Government does not have control. You mentioned veto rights, but that is really—excuse the pun—a nuclear option: the Secretary of State has the power to cancel this whole thing.

No. For certain types of votes on the different boards—in particular, on the holding company board—I think 25% is required to block certain types of decisions, and we have more than the 25%. So within the board structure, there are certain types of decisions that we can actively veto. That is not how we are going about doing it; we are trying to work with other investors, because we have an aligned and shared interest to get this built to budget and to time, but in certain circumstances, there are certain types of decisions.

It would also be very difficult to bring the private sector in if the Government had a right to override them for what they might see as policy reasons. They are coming into this with a commercial mindset, and they are incentivised to drive to low cost and low time. If they were able to be outvoted at any point in time by Government, we would have had a lot of difficulty bringing them into the structure, and it would indeed defeat the purpose of having them there in the first instance.

Clive, could we have a fairly comprehensive note on exactly what the Government can and cannot veto?

Yes.

It worries me that we have another HS2 on our hands here. The Department lost control and HS2 lost control because they did not exercise appropriate control over the entire project, particularly in the early stages. How can you assure me that this will be different?

It is worth saying that we have studied all the reports coming out about HS2 in the design of this, and we will continue to do so as it gets implemented.

One of the recommendations in the report by James Stewart was about the need for Government to be able to behave more like a commercial investor and to bring commercial investment to bear alongside that to try to achieve the right outcomes.

We will send you a note, but I can assure you that there is an uncomfortable position for them. If we go above the HRT and they do not decide to put in more money, there are a number of mechanisms such as cash sweeps, clawbacks and dilution, which means that any money put in in advance—presumably either by the consumer or the taxpayer—is treated more favourably. We will come back to you with that note.

I want to start with what the NAO said in its as usual excellent Report: “No comparable nuclear power station has been completed”—

Could you tell us the reference for the record?

It’s in the summary. Chair: Can you give us the paragraph number?

I don’t actually have it. The summary says: “No comparable nuclear power station has been completed without substantial delays or cost overruns, and uncertainties remain around construction performance, future electricity demand and the competitiveness of alternative technologies.” This project, as we know, will not produce electricity until the late 2030s, and it will produce electricity for about 6 million homes. As you rightly say, it is going to go through several Parliaments, so the people responsible for delivering it today will very probably have ridden off into the sunset. So I start with that concern. I then look at the principle of the whole thing. We have done some work on nuclear, and I have a copy here that I would like you to take away with you. I think this is ’60s technology; I think the Rolls-Royce modular is far more effective. As Tris said, the French are not building this technology any more. There are also other alternatives; there is something called Apollo Atomics—I do not know whether you have heard of it—in America. You talk about avoiding risk. That is what London has done, and it has self-immolated. You cannot avoid risk; you have to be prepared to look at some risk in anything you do in life. I am pro-nuclear, but I am not pro Government being involved in the financing of nuclear projects. In this case—and I want to get to the point here—how are you going to ensure you do not go over £47.7 billion? I actually think you have the worst of all worlds. You have a minority shareholding in the board and, let’s face it, the private sector is always more fleet of foot than the public sector: they are smarter, quicker and actually motivated to make money, and the public sector does not share any of those things. When I look at the financing arrangements, I see that—I am sorry, but you all talk about this stuff—in the end it is about the taxpayer. When I look page 43 of the Report about “The government’s support package”, I am with Tris: I do not think you will deliver this within £47.7 billion. So you are then going to be looking at that clause, which has all sorts of contingency reasons why you are going to be financing this, and it will be the taxpayer doing that. Ultimately, what you are doing is giving the private sector a very good return if they do, by some amazing miracle, come in at or under budget. If they do not come in at budget, they are still getting an acceptable return and they are not taking all the risks. The taxpayers are still taking the risks; they have already taken some risk through their bills, because this has been mutualised across their bills. So I would like to know why you think this is the right technology and why you are so confident, given what the NAO says, that you are going to deliver this within the £47.7 billion, which is the upper limit of what you are talking about. You can tell me I am wrong, but I do not think I am wrong when I read the document.

Let me kick off with the technology choice, and then we will come on to the financing package separately. Particularly having been around when we were talking about the development of Hinkley, a major benefit of building a nuclear power station is the replication effects—the ability to take not just the designs, but the teams, the skills, the know-how and the supply chain and replicate them. Those are substantial, and the Report brings those out in terms of the benefits that are—

It is still outdated technology, though.

One of the main reasons we decided on Sizewell in this design was that we were able to take advantage of those. We are not precluding any decisions that we might make in the future. As I say, we are enthusiasts about SMRs and other models, but we are trying to plan a programme that manages risk across the sector. Secondly, I do not think we are saying that we are getting rid of all risk. You are right: that is impossible. Our job for, any major programme, is to set up the structure that best manages those risks and to make sure all of us play our part across the governance structures to ensure that the programme is delivered as close to time and budget as it can be. In terms of the financing and regulatory structure, there are two things. If we had gone for a CfD and purely private financing, as we have before, we think that that would not deliver the best value for customers or indeed be affordable for customers.

You think—have you done a lot of modelling on that?

There is a huge amount of modelling on that that shows the different rates of return that you need to apply and the costs that would result. I am sure we are happy to share the initial—

They probably did a lot of modelling on HS2, and that didn’t work too well, did it? But there we go.

Quite, and we have learned lessons from HS2. The point is that we are not replicating HS2. We are not putting in a fixed price, because of the cost that is involved. We have created a regulatory system that balances those risks. You may or may not know my background; my background is in Ofgem, where we have this regulatory model. That is what we apply across all networks, on the same principle that this is the best and most efficient way to manage risk for the public. We have also set up a governance structure that allows the combination of Government and the private sector to deliver. Caroline has mentioned the reason why we have majority private sector on the board, and for all the reasons you have described, we are not saying that this should be a pure public project, but without a doubt, at any point in time, there is a major public interest in how this is delivered. That is why we have set up the structure that we have. Finally—Nigel can expand on this—the reason why we think this is a success is that it is in a very different place from any previous nuclear project, because of the maturity of design and the work that he and his team have done to get us ready. I am genuinely not sitting here saying, “There is no risk”—that would be unreasonable for anybody—but, in terms of anyone embarking on a major programme like this, I think we have put a structure in place that best allows us to manage the risks. Nigel, do you want to expand on that?

The technology is, basically, a pressurised water reactor. It is a big one, but it is a pressurised water reactor. I think 67% of the world’s reactors are pressurised water reactors. The Rolls-Royce SMR is a pressurised water reactor, so the technology is very similar, to be honest. Your challenge was that none of these things has ever been delivered on time. If you look globally, where there has been a fleet, they are. If you look now, the Chinese generally put one of their gigawatt plants on within five years of putting the foundations in. If you look at the Barakah experience, where the Koreans built four, when they started off, the first one took a long time, but the fourth one was much quicker and cheaper. The whole global picture tells you to build a fleet of whatever you are going to build, and you will get the best results. I think that the technology is very similar to anything else; it is just on a larger scale. The piece where you need to learn—you can only do this if you have a mature design—is the modularisation piece. That is the key to construction and timelines that are consistent, because then you are in a factory and have a consistent output. But you can only do that if you have a stable design. It is very hard to imagine that unless you do the first one, you have that stable design, you know it works, and you have gone through a commissioning programme and so on. What will make us a success is our ability to take that Hinkley design and turn it into factory modules, turn it into precast, and turn it into building things on the ground and lifting them in, which is a step up again from what they have done at unit 2 at Hinkley. I do not disagree that there is a very poor picture globally about first-of-a-kind units. There is a very good picture of a fleet effect, and that is what we are trying to replicate. We are on the start of that journey, and we start off very confident that we can do it.

Nigel, I think you were involved in Hinkley Point C. Am I right that a lot of the cost overrun came from a lot of half-witted civil servants with not enough to do turning up on site, demanding meetings, cocking their leg on things and getting in the way? Is that a fair comment? Have we got that under control for the new project? That wastes a lot of time and money.

I can’t comment on that, but I can comment on the fact that we are well supported by the Department to make sure that we focus people on delivering the job. We will continue to do that. The big lesson I learned from Hinkley was about a lack of maturity at the start of it around the cost estimate and a lack of maturity in design. There were 7,000 design changes, which none of us anticipated. That had a huge impact on the project.

Caroline, am I wrong about the ultimate guarantee being the taxpayer on this, if there is a cost overrun? I know you all talk about confidence in there not being a cost overrun. Is what I read in the Report right?

Yes.

I am also right, aren’t I, that the Secretary of State has the opportunity to cancel the entire project if he decides to do that?

Under certain circumstances, yes.

That is also in the Report, isn’t it? I have written “joke” against that. Having spent all that money, that would be a complete joke.

It would be, but we are talking about the value of early warning. If it looked, very early on, like there was a breach of the higher regulatory threshold being forecast, there would be an option under the discontinuation agreement to do that. As you say, it would be a last case—

So it could still be a case of, “Thank you, taxpayer”?

Yes, the taxpayer will need to intervene, but that means that other shareholders will be diluted and their returns will go down.

Their return is still very good. I have looked at their return, and it is still very adequate, even if that happens. Jonathan, do you know what it is?

No.

Could I just say—

Shall I tell you what it is? It looks to me like they get 12% to 13% if costs are low, which is a pretty decent return. Please tell me if I am wrong, but it also looks like it only drops to 10.8% to 11.4% if the costs overrun. Where is the penalty? I do not see it.

Let me explain it to you. Unlike PFIs, this is not a transfer of risk. One of the things we have established is that there is no balance sheet big enough to take this deal with that, which is the reason why we moved away from the CfD. Ultimately, it was always going to be the public sector that was looking at this, and given that fact, we have tried to ensure that we get the best commercial disciplines into the deal, which is the rationale for bringing it in here. We are not trying to pretend—

You also mentioned that Hinkley C was financed at the time when interests were virtually 0%, but let me tell you that that is not normal in history. Those interest rates were an outlier; where we are now is far more common in terms of long-term interest rates. That was because the Government were printing vast sums of money and keeping interest rates down at 0%. Let’s not talk about things that are not the norm; the norm is where we are now.

We accept that point, and that is why we have said that the comparison with Hinkley is not necessarily straightforward.

But it was used as an exemplar.

I just want to double-check, but I think the figures you gave are for the project at the HRT. If you go beyond the HRT, some of those other pressures and disciplines kick in. As I understand it, they are not included in the figures you have there.

It is also worth saying that those are the ultimate returns. A lot of these people are driven by yield, and what you see in delay scenarios is that the distributions are getting locked up for very significant periods of time. So, yes, those return numbers that you are quoting are dependent on this thing getting into operation.

I think you have the worst of all worlds here—that is my opinion, and I am not sure that you are going to change my mind. This Committee’s job is to try to protect the taxpayer, but the poor taxpayer is a punching bag for any form of incompetence—on which the Government have a proven track record—during the delivery of big projects like this. I think that part of the reason for modular is that the technology is better—we can have a debate about that, and please take away the paper I have here—but it is also the fact that you have much smaller delivery risk, which is the whole point. This is another vanity project; it is very long term, and the people making the decisions now will have ridden off by the time that it is, or is not, delivered. I think that is me on that issue, Geoffrey; I don’t think I can say any more. However, I am concerned, and I think Caroline has confirmed that my concerns are justified.

Going back to what you said, Caroline, and looking at these private sector yields, why did you not consider a model where, if they go above the higher regulatory threshold, they actually have to put more equity investment in? That would have given them a real incentive to deliver it on time.

That was not deliverable in the market. This was a competitive process, and we had a number of very serious international infrastructure investors involved, but they needed a capped equity investment. They were prepared to take the negative impacts of the project continuing and them not putting more money in, but as of today, they needed a capped investment.

I want to take a break in a minute, but I am still not quite convinced about why you did not have the governance arrangements stronger, so that the Government had some form of control. They have a minority control on the board, but they are putting in a majority financial stake. Why was that? Surely a private sector investor would not have invested unless they felt that their fellow private sector investors’ interests were being looked after on the board.

We have a minority equity stake; we do not have a majority equity stake.

But that was the Government’s choice.

Yes, ultimately.

It was their choice, wasn’t it?

We wanted to bring in private capital, and private capital would not come in if Government had the ability to run it as Government, not as a commercial investment.

Okay. I have one other point before we break. The contracts for difference on Hinkley C determine what price of electricity you were going to pay once the thing was built. What is the mechanism here for how much the Government, or the consumers, pay for their electricity once it is built?

Again, I refer you to figure 8. What they do is get a return on the RAB. Up until the post-construction review, which is about three years after the second turbine is finished. The IWACC was set by the Secretary of State. Thereafter, every five years, it will go into a standard regulatory review. I might ask Joe Rippon to come in.

Yes, let us go to Joe for his maiden performance.

As Caroline started describing, there is an allowed revenue calculation under the RAB model. Philosophically, it is providing return of all efficient costs—construction and operation. Once you start operating, there is a return on the capital that has been invested, there is a return of the capital that has been invested and there is an allowance for efficient operating costs. As you can see in the chart in the NAO Report, that is not a flat line across the operating life of the project. It is not a single pounds-per-megawatt-hour value in the same way that a CfD is, but the average cost in the LRT scenario is about £76 per MWH hour in today’s money.

In that table, there is a line about corporation tax. On what is corporation tax levied?

Sizewell C will be making profits, and corporation tax is paid on those profits. That is the corporation paid by Sizewell C.

On the return on investment?

Corporation tax is levied on the profits made by Sizewell C generating company.

For the total time it is operating?

Yes.

So the consumer is having to contribute to corporation tax?

In the same way that any generator today is being paid money by consumers, it is also paying corporation tax on the profits it is making.

That is standard across regulatory models—for networks and so on, that is what would happen.

All right. Let us take a short break and restart in the next five minutes.

Rupert, I think you have the first question.

I expressed my concerns in a previous question. On a similar but much smaller scale, I managed the construction of Southampton football club’s stadium, which cost about £34 million. We had very strict rules about reporting cost overruns. There was a very restricted number of people—two of us: me and the managing director—who were able to sign off on variations. My question is, first, how are you going to manage variations, and secondly, how are you going to keep this Committee and, more importantly, Parliament in close touch, on a dynamic basis, with whatever cost overruns you are experiencing? Otherwise, we are going to end up with a nasty little shock some way down the line, when most of us will have forgotten that this conversation ever took place. Are you going to make it a statutory requirement that you report back to this Committee and to Parliament? Are you going to provide formal notification of any cost overruns, on an ongoing basis? How are we going to deal with that? Ultimately, as we have established, either the taxpayer or the electricity bill payer will be picking up the tab for this, so it is quite important that we all know—and that it is transparent and clear—how the cost overruns are mounting up. How are we going to do that?

The company will deploy the corporate governance code. It aspires to have the best levels of governance. We have a board structure that has shareholder directors, independent non-exec directors and an independent chair—very few executives—so it holds the executive to account, basically. Certainly, from a personal point of view, I feel very accountable. Every time we go to a board, we have to explain exactly where we are, what changes have been made in the month and what the position is as far as contingency drawdown and the schedule are concerned, as well as overall company health. The company will produce an annual report, the first of which is due out at the end of July. Through that, there will be complete visibility of where we are as a company, what our challenges and risks are, and where the project is.

If you were a properly quoted public company, you would produce updates much more frequently than once a year. What public or parliamentary updates will you give in between the annual report and accounts, so that, if things start to go wrong, we in Parliament can see that very quickly?

As part of our overall delegation of authority and all the requirements around our shareholder agreement, we have to produce, during a year, 25 or 28 different reports—some monthly, some quarterly and some annually. We keep the Department up to speed on a monthly basis. It gets a monthly dashboard report from us, and that goes into the Government body. Obviously, Government shareholders get a monthly report and lenders get a report. We also have something called the ITA. As part of the RAB model, the ITA has absolute sign-off on change and acceptability of spend. We have a lot of governance around spends, costs and the rest.

I understand that, but how much of those updates—monthly, in some cases—will be accountable to Parliament and therefore in the public domain?

At the moment, our plan is to provide an annual report to Parliament that would use the data that comes from the company’s annual report—

Can I suggest, Clive, that that is not adequate? Even HS2 produced six-monthly reports, and even they were late because things were going wrong. We need to see regular updates to Parliament. What can I extract from you in that respect?

We will take that away. Obviously, we have commercial banks and private investors in the company, so we need to work on the timing. The great advantage of using the audited accounts is that that has all been signed off. We do have quarterly independent reports going to the liaison committee, which is made up of Ofgem and the Government in its policy role, so there is quite a lot of escalation. In terms of six-monthly reports, we will take that away.

We will take that away and come back to you on reporting. That is a fair point.

That is very kind. Just be careful about the use of the phrase “liaison committee”, as we have a Liaison Committee in Parliament, which is totally different.

We have just gone into how accounting to Parliament for the spending of public money is really important. Nigel Cann, you are the accounting officer for this project. How can you account to Parliament for money if you cannot control the spending of it?

Sorry, what was the question?

Well, you are the accounting officer, so you are responsible to Parliament for the spending of money on this project, but you cannot actually control that spending, so how can you be truly accountable?

It would be unfair to say that you cannot control the spending. Everything is spent via a governance framework and mechanism, so we are not unconsciously spending any money, and we are very much ensuring that it is not novel, contentious or repercussive. That is what I, as accounting officer, will be looking at. Via our governance processes in the project, we have absolute visibility of what is being spent, what it is being spent on, why it is being spent and why it is appropriate. Again, as with all good governance structures, there are lots of layers to that, one of which is the ITA. Every time we make a claim under the RAB, it will have a view on whether it is appropriate or not—as will I as the accounting officer.

Ultimately, decisions are made by the board, on which the Government are in a minority, aren’t they?

The board ultimately has control, but as an accounting officer, I have a standalone role, and I am responsible for conduct in relation to what we spend public money on.

Even where you or the Government disagree with particular decisions taken by the board?

Well, I would be in discussion with the principal accounting officer to say that I was out of step with the board, but there would be discussions on that within the board beforehand, and it would be a bad day if we ever came away not agreeing.

I am sure that is the whole purpose of having stakes on the board and different percentages of voting rights: you can end up with a disagreement. It is clear who can vote and take a decision against somebody else and their position.

The board works in a more consensual way. At the moment, there is an ability to vote and there is a shareholding within the board that could influence where that vote comes. Ultimately, as I say—you were focused on my role as accounting officer—I take my role very seriously and have discharged it, hopefully, through the board. If not, then I would have to have a conversation.

May I just come in? There is a particular role that Nigel has as the accounting officer, but the board also holds him accountable for the spend of all the money on the project by the company. Those two things are lined up in terms of what he is doing day to day. Moreover, because this is funded through a RAB, you have very strict judgments being made by Ofgem around where the spend should be going ahead as entitled under the RAB. You have that extra form of discipline that, without that structure, you would not normally get around either a Government project or, indeed, a private sector project.

If there is a difference on the board and an agreement to spend money that you, Nigel, or other Government members on the board are not happy with, is that made clear to Parliament and to Government, or does the confidentiality of board decisions mean that you cannot do that?

I might just talk a bit about the role of the accounting officer in this process. It depends on the nature of the disagreement, for a start. The accounting officer has four principles that they have to abide by. The Committee will know, I hope, what those principles are. That is what Nigel has to make in terms of his judgment and making sure that the project is delivered. Our point is that we think that all stakeholders are aligned to drive value for money through this project, because all of them are looking to do this for the least time and least cost.

My answer is similar. It is hard to imagine a scenario where we would be out of step. If you imagine what the shareholders want, it is compliance with the RAB licence to ensure that we can recoup their money. Clearly, if we are not in compliance with the licence, we probably would not be following the requirements of the accounting officer. I am trying, but it is very difficult to imagine a scenario where we would be completely out of step with the objectives of both of those roles.

Jonathan, if the whole thing was going that wrong, surely the answer would ultimately be for you or Nigel to ask for ministerial direction. The Government would then use whatever powers they felt necessary to deal with the situation.

There are established processes for what we do, but there are times when Ministers take decisions that the permanent secretaries do not necessarily agree with personally. That does not mean that you breach the principles behind being an accounting officer.

I am pleased that you are all so confident that you are going to deliver the project, given your previous experience, but we have to come back to the Committee’s experience of past overruns that set out with all the best intentions and ended up in catastrophe. I have written a list of things that I think have already set the headwinds against you. Angela Rayner’s Employment Rights Act has pushed employment costs up. Rachel Reeves’s corporation tax increases and threshold cuts to NI have also pushed up the costs for businesses, which are all being passed on. You have construction cost inflation. We have mentioned the civil servants coming to kick a few tyres and waste a bit of time because they do not have anything better to do on site. That is another issue. We have the contractors, who always find a reason to charge more, unless you have them very tightly tied down contractually. As you know, once you have signed the contract, you very often become hostage to it. You have power before you sign it, not after you have signed it—particularly if you sign the wrong contract, which many people do. The public sector has proven to be bad at reading complex contracts with all sorts of nasty little heffalump traps in it. If that happens, you get a problem there. You have planning issues. I know you are confident that you do not have planning issues, but we all know how deficient current planning law is and how difficult local councils are—we have all come across those. We also have the national grid, which is an issue. You are a massive project. I do not know whether you are going to run into any grid issues and neither do you. I know that has been an issue for a lot of people. The Committee admires your confidence, but we want to know: are you aware of all those risks, and are they going to knock you off course? You have to be realistic about this.

Can I come back on the general point? Then Nigel can talk about how he is managing the specifics.

Sterling might collapse, too, in which case your costs go up.

You cannot build a project—or many energy projects—of this scale without having a degree of risk in construction. That is true for offshore wind and major network projects. I come from a background of working with National Grid on their 90 projects to build the transmission system. There are lots of things, like planning and environmental consenting, that you have to get through. We are not sitting here today saying that this project is without risk. We have tried to build a structure that combines the role of the Government—in a limited way for a reason—with commercial investors to set up a system that will best manage these risks and give us the best chance of delivery. I will leave Nigel to pick through the issues that you have highlighted, but I would say—without commenting on the policy nature of some of them—that we had conversations about things like contractors, planning and so on as part of the programme’s set-up. We are not sitting here saying that there is no risk—we should not do that, and we are not doing that. We have set up a system that best manages risk, and Nigel and his team are doing that on a day-to-day basis.

Just to pick up the issues one at a time, we spent a lot of time looking at previous infrastructure projects and what could be learned from them. I explained a bit before about the retirement risk profile that we are aiming to achieve. One of the biggest remaining risks is around the productivity element. When you have lots of people on site and doing lots of things all over the place, it becomes difficult to control and manage productivity. We are attacking that in two ways. I explained that we are trying to take as much as possible into factories. The contractual model we are putting together under that part of the project is an alliance contracting model, which we have gone into. Sizewell C are part of the alliance, so we can see where money has been wasted before on associates, affiliates, subcontracts, piling lots of white-collar workers into sites and so on, and charging 12% on top of that. There are massive issues around that, but we are making those decisions with the contractors. The other piece that we are focused on—this is one of the big lessons from High Speed 2—is not to let contracts that are too big, because they are really difficult to manage once you have let them. We split our big civils contract into about 30 different sub-packages. Each of them will be let and require approval from the board, so we are not going to sign big contracts and be disappointed for the next 10 years. This is about making choices along the journey as each of those sub-packages is let. We have tried to reflect where others have struggled and to put mitigations in place to ensure that we do not fall into the same trap. We have to be fairly humble in thinking that we could, and these are some of things we are doing to ensure that we don’t. On the equipment, as I said before, around 80% of our equipment is now signed with fixed-price contracts. Why are we so confident that will deliver? We are basically asking our manufacturer, which was making 2 for Hinkley, to now make 3 and 4 for Sizewell—the same machines, manufacturing line and people. That helps with quality, productivity and costs.

People can go bust, though, Nigel, as you know. That can knock you off course. If you sign a fixed contract with somebody with a deficient balance sheet and they go bust, that costs you.

That has happened.

On Lowestoft, which you mentioned, along with Hinkley Point C—I want to ask you a question about that in a moment—there is a lot of kit coming in from France that is made in France. To your point about how much of this is constructed in the UK, I think that a lot of the big kit is still being made in France, and French workers are benefiting a lot from this, too. There is a lot of risk. You can talk about fixed-price contracts, but unless you have vetted everybody you have a counterparty risk with, people could go bust—and people are going bust left, right and centre, as you know.

We deploy a tool called Exiger, and without getting all techy, we basically monitor our whole supply chain on an almost weekly basis to make sure that we manage risk. When you have such a large supply chain, that is clearly a risk that you have to manage as a company. We have an almost monthly meeting to look at whether that risk profile has changed. As you can imagine, with recent events in the middle east, we are paying particular attention to that as we speak. On your point about France, our major reactor components are being made in France but a lot of their subcontracts are let in the UK, so we have a lot of factories across the UK.

So manufacturing in France and service industry in the UK; is that what you are saying?

No. Part of my desire is to leave a bigger footprint in manufacturing in the UK. We have recently supported a company to open a new factory in north Wales, which we are looking to use for pipework, as well as the current support systems they are using. We are about to expand a factory in Hull to twice as much as it was previously, when Hinkley was using it. We are trying to expand the footprint of the UK. This needs to be a UK project; it needs to expand the skillset in the UK and to expand the supply chain so that it can serve others.

Thank you for that. I have one question for all of you about the coastline. You are right on the coastline. I have not had a chance to look at exactly what you will do regarding the shoreline, but you need to be aware that if you do anything there—this comes back to Hemsby, in my constituency, which the Government promised before the election that they would sort out; they have now seemingly failed to do so—what happens at one point of the coastline affects people down the coast as a result of onshore drift. If you are not careful and you start to interfere with the coastline, you could easily find yourself with a very large bill for what happens below you if you affect that onshore drift. You can create sandbars and scouring, and start to see erosion on the coastline—I know a fair bit about my constituency’s coastline. Have you looked at all the contingent liabilities such as that?

Every structure that we build has quite a robust modelling examination done on it from a coastline point of view. We recently shared some of that with one of the local communities close to us at Thorpeness, which is struggling with coastal erosion, so we absolutely understand the impact of every structure. Most of the structures that we will build out to sea are underground. Obviously, we are going to build quite a significant seawall, which will have a rock armour frontage, but all that has been completely modelled.

But if you do more to that coastline, Nigel—

Sorry, Rupert, but I must interrupt at this point because the permanent secretary must go at half-past 2. Permanent secretary, do you have a final message?

Rachel has a question, doesn’t she?

The hearing will continue—don’t worry—but the permanent secretary has to leave.

The final message from me is that this project is a really important part of our energy mix. We think that it is positive to diversify risk both, ultimately, for customers and for the local economy and economic growth. It is personally important for me, and we have put structures in place to best manage the risk. I hesitate to say this, given the question that was asked, but my first visit was to go down there to see live the progress that has been made. I promise that we did not distract them too much when we went down there, but that shows how important it is for our overall portfolio. I am sure that we will be back here, but we have the intention to deliver good value for customers and to make sure that this project is delivered as well as possible. If we do not build things like this, we will not have the system that we need.

Thank you, permanent secretary, for coming to this hearing. You have important business; you have to fly to the United States. We are grateful to you. The hearing can continue. Rupert, you were questioning Nigel.

Only about the coastline: if you start building defences on the coastline, that is exactly what creates problems further down the coast. In our case, sand dumped above my constituency built a sandbar below it and you then got coastal erosion, so we need sea defences built to stop houses being destroyed, at a vast cost. You need to look at those contingent liabilities, potentially, if you are doing anything on the coastline. That was just a general point. It is the sort of thing that demonstrates how much contingent risk there is with a big project such as this.

I want to ask about bullying. As I said, my constituency includes Hinkley A, Hinkley B and Hinkley C. Once elected, I was inundated with whistleblowers and people who have great concerns about the bullying culture at Hinkley C, to such an extent that I had a meeting with Simone Rossi, the chief executive of EDF Europe, and the ONR. The ONR felt that the situation was so bad that they had to put in extra scrutiny. I was joined by WhistleblowersUK in that. How will you ensure that the workplace culture at Sizewell C does not suffer from the same bullying and workplace safety concerns that have been alleged at other sites, including HPC? I will also put on the record that I have absolutely full confidence in Nicola Fauvel and her team at HPC. She has recently been moved there. I very much hope that the recent change in personnel, when the individual has in fact joined the board at Sizewell C, will not be replicated as it was at Hinkley Point C.

Obviously, the culture of any organisation starts from the top, so I guess it is important that I absolutely display all the values you expect from the leadership of the company. Respect is very much at the heart of what we do. We have a very vibrant network—a series of them—that currently works across our company, making sure that everybody is represented. We very much portray a respect agenda. We set an environment up for success, so we have pastoral care and healthcare at site, a really robust induction and a workers charter—all the things you would expect. We have very close relationships with the trade unions. For us, the respect charter goes both ways, so we expect people to turn up to work at their best—we need them to do a great day’s work for us—and we want them to leave content and satisfied that they are part of something that they very much want to be part of, and to enjoy coming to work and the environment that they work in. So we have absolutely set the site up for success. We regularly do worker surveys so that we get a really good idea of what people are feeling and thinking. We have, as you might expect, “speak up” programmes, whistleblowing programmes, which are actively monitored by our ARC, a sub-committee of our GenCo board, and we probably get about five speak-ups a month—you might say that is terrible, but actually it is quite good, because if there were none, I would be really worried. We take every one of them seriously, and every one of them gets an independent investigation, and that is followed through with either the individual, or they can equally be anonymous.

I can give you some good news, perhaps, from our meeting with Simone. Unfortunately, WhistleblowersUK deemed the speak-up situation at Hinkley Point C as being not fit for purpose. Both WhistleblowersUK and I recommended that he looked at what David Peattie and the NDA team have done at Sellafield, which is exemplary. Perhaps I could urge you to do the same at Sizewell C, because it is a completely different ball game. The reassurance that the individual who was recently moved from Hinkley Point C to Sizewell will have little or no contact with personnel is very reassuring.

One actor in this we have not really discussed today is EDF. EDF managed to negotiate its equity stake down from 19.9% to 12.5%, which means that if the investors’ stakes are reduced because it is not delivered on time, it will suffer less of a penalty than it might have been expected to do. Presumably the board has a contract somewhere along the line with EDF. Other than the equity returns, what is the incentive for EDF to get this thing done at the lowest regulatory rate?

Obviously, EDF acts as a shareholder, within our board, but all the contracts are stand-alone contracts, arm’s-length contracts, and I in the first instance and the board in the second instance hold EDF to account to deliver their contracts. That is the relationship.

I get that you have a contract in place—it would be reprehensible if one were not in place—but what is in those contracts that gives EDF an incentive to deliver the lowest regulated price?

All the incentives within all our contracts are aligned to deliver way below the LRT, or lower regulatory threshold, so as I recall, within the range that we have from our baseline up to the regulatory threshold, we are obviously pushing much harder to get below the baseline. That is where the project is at the moment. All of our contractors are incentivised to deliver below the baseline in the first instance.

They are the main contractors—I am still not quite getting this. Maybe that is me, Nigel.

They provide three key parts for us, really. They provide the engineering, which is much smaller than Hinkley; it is a fraction of the engineering costs because, obviously, we are just replicating a design from Hinkley Point. It is about a fifth of the cost of Hinkley, as far as design costs are concerned. They provide services through Nuclear Services Co., of which we are actually a one-third owner. That is a good model, because we are part of the company that is delivering the product. Then there are the two big technology providers, Arabelle Solutions and Framatome, for the nuclear islands. Again, we are holding them to account. Like with any other contracts, their incentives are to deliver. Those are, in the vast majority of cases, fixed-price contracts, so the big challenge for us is not to change anything because then they cannot claim. Really, the power is with us to make sure that we do not deploy any changes. We copy exactly the way Hinkley was done. That is where we need the regulatory support. That is why the Fingleton report is so important—and is embraced by us, really—because we do not want design creep and change through the whole of our programme. We see that as a fundamental tool to allow us to hold EDF to account under their fixed-price contracts.

So who is the ultimate project-delivery organisation?

Sizewell C.

Who co-ordinates—

Sizewell C.

Sizewell C. Maybe this is me not understanding the situation fully, but what is in those contracts with EDF to incentivise them to deliver this at the earliest possible point? I mean, you have the whole board and all the other shareholders; they could all sit there, swearing at EDF for being dilatory about delivering this, that or the other, but what is the sanction you could give?

I will give you an example. As I say, the majority of these contracts are fixed; the flexibility is about the change element. What you could say they are incentivised to do, if they wanted to be completely commercial, is to try to do as much in the non-fixed piece as they can. Our job is to make sure that we do not change anything, so they have to work in the fixed-price piece. Our whole contract structure is: known scope, fixed; unknown scope, not fixed, so don’t create any unknown scope. That is the incentive. The incentive for them, perversely, is to deliver to their plan but maximise change; our job is to minimise change, which minimises their opportunity for overspending on the contracts.

So does the board sign off on all variations?

Obviously, we have various delegations, but most of the EDF stuff would be seen as—I forget the terminology—

A related-party matter.

A related-party matter. So, because it is a related-party matter, the board has to sign it off. Very small levels of change under related party contracts have to be signed off by the board. It is very much set up from a governance point of view, as you would expect. We have probably more controls with the EDF contracts than we have with any of the other contracts.

So if the board is the project manager, who is the project manager on the board?

Ultimately, I am the project manager for the company, held to account by the board.

You will actually be overseeing the work in progress—all the concrete pouring and the engineering?

Well, obviously through a team. I run the company, with ultimate responsibility under our organisational structure. We have a chief operating officer, who is ultimately responsible for the asset delivery, but as you would expect, they are supported in all the normal functional challenges by a chief financial officer, a chief commercial officer, a chief people officer and so on. The whole C-suite is really accountable, but the board directors are the CFO and the CEO, and ultimately we are held to account by the board.

Because my experience is with Hinkley C, one of the things that concerns me—my constituency has changed; it was Bridgwater and West Somerset but is now Tiverton and Minehead—is that, historically, a lot of the community investment went to the Bridgwater side of my constituency, for one very good reason that I don’t have to go into, and I find it increasingly difficult to get EDF to put meaningful community engagement and funding into my constituency. I wish I could twist Andrew Cockcroft’s arm a bit harder than I am able to at the moment. With Sizewell C, is the spend on community engagement really helping to deliver the project and reduce risks or, as I suspect is unfortunately the case in my constituency, are you just buying community acceptance?

You go through various stages at the moment. From a supply chain point of view, if you look locally, people can see great engagement across Suffolk, not just across what would be the equivalent of Bridgwater. If you talk to the chamber of commerce and local businesses, you see really good engagement. From a workforce engagement point of view, we have been challenged, quite rightly, by local MPs to ensure that we spread beyond the Suffolk coastal area. We have committed to 500 jobs in Ipswich and 500 jobs in Lowestoft, as well as making sure that the town that is most affected, which is a town called Leiston—

There are not enough in Great Yarmouth, Nigel.

I am sure we will get there. The uniqueness of Leiston is that we are on its doorstep. It is a community of 5,000 people. At peak we will be at 7,000, so the town next to the town will be bigger. It is really important that we respect that, and the fact that we are probably going to have more impact on them than there was on the people of Bridgwater, for example, on a day-to-day basis.

Bridgwater is not in my constituency.

No, but look at Lowestoft. It is quite a long way, and it is probably the equivalent of where you are in Minehead. We have already committed to the local MP that we will provide 500 jobs, and we already have 200 people working there.

I think what we are looking for, particularly in west Somerset, are mitigation factors. My constituents have had to live with full-blown lights, broken roads and a lack of community infrastructure, whereas Bridgwater has benefited. I am putting that on the record. I would love to do a compare and contrast between what you have done at Sizewell C and what has been done in west Somerset and my constituency. Notably, there is not a swimming pool in Minehead with a community therapy centre.

We are very happy to share what we have done and distribute that.

That would be great.

Our big challenge is to hit a series of milestones. At the moment, a big focus for us is to get as much of the infrastructure in place as possible. We have 11 km of rail track into the site, and we are bringing in engineering trains as we speak. By the end of June, we expect to get two trains a day into the site, and we are looking to get four trains a day by the end of the year. With the road schemes, we have tried to focus on the on-carriageway schemes. There has been a big focus on trying to get the A12 roundabouts in place, and now they have been finished, you will see a marked improvement in the road infrastructure at Yoxford and Friday Street. With some of the off-road schemes, we are making sure that we get the right contractual arrangements in place. We are probably a little behind in setting the link road and the two-village bypass, but we made the conscious decision to make sure that we get the right price rather than rush in with a low level of design, going back to the earlier conversations. We have a high level of design, and we are now going to competitive tender. We will make sure that we get the best possible value for the road schemes. On site, you mentioned the sea wall, which is an enabler for us. The big challenge for us in 2026-27—this financial year—is to get what we call the cut-off wall, which is the impervious wall around the outside of the site. It is about 1,600 metres, and 50 metres deep. That then allows us to pump out the water in the middle of it and start the deep excavation. The sea wall is an enabler for that. It is not a particularly critical path; the critical path is getting that in and getting the pump on. Lots of things need to come together to make that happen, but we are on track to do it by the end of this financial year.

The sea wall piling should be done by the end of this month.

Clive, going back to the discussion at the beginning on big nuclear power generators, as opposed to modular nuclear power generators, is it envisaged that another big nuclear power station would be built in the foreseeable future?

As a Government, we do not have a plan for what the next level of nuclear development will be. We have a plan for small modular reactors, as we have talked about, and Rolls-Royce is on contract with Great British Energy—Nuclear to start to progress that. The Government have ongoing work on the strategic spatial energy plan, and that will give a sense of the amount of nuclear power that will be needed in the future. Judgments will need to be made as to the right form of nuclear for that, whether it is gigawatt-type plants, what we describe as SMR-type plants or the advanced nuclear plants that Mr Lowe described. So we do not have a number at the moment.

And given that the national grid needs a great deal of investment, are you confident that it will have sufficient capacity when Sizewell C power comes online?

Yes. Nigel might want to say a bit more. One of the many benefits of Sizewell C as a site is that it is already very well connected to the national grid, because there is a history of nuclear plants there.

Obviously, when we did the analysis of Sizewell B and Sizewell C together, the expectation was that Sizewell B will probably get its life extended and Sizewell C will carry on for the next 60 to 80 years. It is important that we keep that grid connection, which is very mature. At the moment, we do not envisage having to put any more pylons into the site. We are making plans to have a combined substation for Sizewell B and Sizewell C, and we are working closely with the National Grid on that.

I thank you all very much for coming to give evidence to us today. We will look at that evidence very carefully and then produce a report with recommendations, which I hope you will all consider. An uncorrected version of the transcript will be available in the next few days, in case there are any factual amendments you wish to make. Again, many thanks for coming.