Apollo backs £4.5bn loan for delayed Hinkley Point C nuclear plant

One of Britain’s most delayed and expensive infrastructure projects, the Hinkley Point C nuclear plant, is receiving a crucial financial lifeline.

US asset manager Apollo Global Management is reportedly preparing to lend £4.5 billion to plug a funding gap for the site in Somerset.

This move signals a broader shift in the UK’s energy funding model, where large-scale public infrastructure is increasingly being supported by private investment capital.

The Financial Times reported the deal on June 20, and two anonymous sources later confirmed key details to CNBC, highlighting Apollo’s role in providing unsecured, investment-grade debt at a sub-7% interest rate.

Hinkley Point C faces fresh cost pressures

The Hinkley Point C project, owned by France’s EDF, has been plagued by rising costs and repeated delays.

As of early 2024, the estimated cost of completing the twin-reactor station has ballooned past £40 billion, making it the most expensive nuclear development in the country’s history.

EDF had been left to bear this financial burden alone after China General Nuclear Power Corp (CGN) withdrew its support in late 2023.

CGN’s exit followed the UK government's decision to push the Chinese firm out of another nuclear development at Sizewell, raising geopolitical concerns over China’s access to critical infrastructure.

In response, EDF began searching for private capital to help shore up the project. Apollo’s involvement fills a crucial gap created by CGN’s exit, allowing construction to continue without immediate state financing.

Despite setbacks, the first reactor at Hinkley is now expected to begin generating electricity by 2029.

When complete, it is projected to supply energy to six million homes across the UK.

Private equity sees long-term gains in UK infrastructure

Apollo’s decision to back Hinkley Point C with billions in unsecured debt underscores growing confidence among private equity players in the UK’s infrastructure sector.

The deal also reflects a broader trend: institutional investors are increasingly looking to put capital into long-horizon, capital-intensive assets like energy, transport, and housing.

Earlier this month, Apollo President Jim Zelter told investors that the firm sees scope to deploy $100 billion across Europe in the next decade, including in Germany, where energy and data centre projects are expected to expand rapidly.

The Hinkley loan, if finalised, would mark one of the largest private investments in a UK energy project with national significance.

Energy strategy pivots amid political and financial risks

Hinkley Point C is the UK’s first new nuclear power station in decades and forms a key part of the government’s long-term energy strategy.

Nuclear remains a politically sensitive topic in Europe, but the current administration has pushed ahead with plans to approve more domestic projects to reduce reliance on fossil fuels and imported energy.

The recent financial strain at Hinkley has also exposed the risks of relying on foreign partners, particularly amid rising geopolitical tensions.

CGN’s removal from UK nuclear plans was partly due to security concerns, prompting a policy shift towards Western capital for funding strategic assets.

Despite its long gestation and cost overruns, Hinkley Point C is seen as essential to the UK’s net-zero ambitions.

Once operational, it is expected to generate around 3.2GW of electricity, helping stabilise the country’s grid during the transition to renewables.