EDF's Hinkley Point returns 'substantially higher' than other projects

The European Commission is investigating whether Britain's support for nuclear complies with European Union state aid rules.

The EU's executive arm questioned in its investigation report whether returns of 10pc on a nuclear project are justified.

Britain is counting on the construction of new nuclear plants to replace ageing and polluting power stations that are closing down over the coming years.

The Government's support mechanism for nuclear power is unprecedented in Europe, which means the deal is attracting huge attention.

Besides EDF, the investors in Hinkley Point include France's Areva and Chinese state-owned companies CGN and CNNC.

Carbon Connect also said the way in which the Government and EDF struck their preliminary agreement was not competitive or transparent.

"Competition is desirable both for affordability, by exerting downward pressure on bids for projects, and to a lesser extent public support, in that it can provide a more transparent guide as to how revenue support is allocated," the report said.

The European Commission expects to make a decision on whether it will approve Britain's state aid support for Hinkley Point by the end of the year, and EDF is unlikely to make a final investment decision on the project before then.

Two other investor groups have also unveiled plans to build new nuclear plants in Britain.

Japan's Hitachi is developing up to five reactors at two sites, and France's GDF Suez has taken Japanese partner Toshiba on board to build three new nuclear units at a location in northern England.

These projects are also expected to receive similar state guarantees.

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