The birthing pains of new nuclear Followers of the saga could be forgiven for fearing another false dawn. The talks centre on a so-called "contract for difference" between EDF and the Government. This will offer the energy company a guaranteed "strike price" for the power Hinkley Point would generate. When the market price for power is below that level, the contract will ensure EDF is paid a "top-up" subsidy, funded by levies on consumer energy bills. Without this certainty on revenues, EDF says, the project could not proceed. EDF insisted throughout last year that it must take a final investment decision by the end of 2012 - yet the December deadline came and went without agreement. In January, there was renewed optimism as reports claimed a deal has "basically been agreed" with the Department of Energy and Climate Change (DECC). EDF would be offered a strike price of between £95 and £99.50 for each megawatt hour of power from Hinkley, it was claimed. But in February, things took a turn for the worse. First, Centrica, the British Gas owner which was seen for many months to be getting cold feet, ditched its 20pc stake in the project, blaming escalation in costs and time-scales. When Centrica bought into the project, in 2009, construction on the first of Hinkley's twin-reactors had been due to begin in early 2013, ready to be powering homes by Christmas, 2017. Each reactor might have cost about £4bn. But EDF's disastrous experience building its reactor at Flamanville in France, where costs and timescales doubled, has since revealed the Hinkley plans to be wildly optimistic. Worldwide safety reviews after the Fukushima nuclear disaster in Japan had also required design modifications. By 2013, Hinkley was assumed likely to take at least seven years to build, with reactors costing up to £7bn each. EDF insisted that the lessons had been learnt; the costs and timetable - the fundamental basis for the negotiations over subsidy levels - were "well understood and stable," it said, even if not publicly confirmed. Centrica suggested otherwise. "I'm sure EDF are very confident in their cost predictions and their timetables," Nick Luff, the group's finance director, told The Daily Telegraph at the time. We still think there is uncertainty. Then, it emerged that the Treasury had intervened in negotiations, offering a lowball strike price of about £80, implying an 8pc return - far below the 10pc EDF wanted. "HMT are taking the Mickey out of EDF," fumed one DECC insider. Had the Chancellor been seduced away from nuclear by the prospect of cheap shale gas, they wondered? EDF, growing exasperated, set another deadline of the end of March. Vincent de Rivaz, the boss of EDF's UK division, EDF Energy, warned staff that the talks were "at a critical moment" and that, facing costs of £1m a day with no breakthrough on talks, the company had no choice but to begin cutting jobs. Senior MPs claimed the talks could collapse within weeks. A denouement, one way or another, appeared to be on the cards. And yet April arrived, delivering not a deal but a cold shower to the proceedings. "I am not in a hurry," Henri Proglio, chief executive of EDF group, insisted, in a marked change of tack. As far as I am concerned, negotiations can also fail. Fast-forward to October and, with so many twists and turns already, even the most ardent supporters were last week initially sceptical to hear that a deal was just weeks away. This time, though, sources on both sides of the talks appear confident. Reports suggest that strike price negotiations are now focused between £90 and £93. As The Sunday Telegraph reveals today, the final price remains dependent on agreement over gain-sharing if EDF enjoys a windfall from refinancing, or pain-sharing in the event of cost overruns. But agreement on both issues is expected to be reached. Heads of terms could well be agreed within two weeks, with key points published, before being laid before Parliament. If the negotiations have been torturous, part of the reason lies in the sheer magnitude of what is at stake. A difference of £3 in the strike price might not sound like a lot but EDF will receive this strike price for every single "megawatt" hour of electricity it generates from Hinkley Point for the duration of the contract. Supposing Hinkley generates a not-unrealistic 25m megawatt-hours a year? At a strike price of £90/MWh, that's an almost £2.3bn-a-year contract. At current market power prices of about £50/MWh, consumers would be on the hook for about £1bn a year of that in top-up subsidies. If the deal lasts for 35 years then, ignoring discounting, the contract could come in close to £80bn. An insignificant-sounding £3 on the strike price? An extra £2.6bn on the total bill. These are scary numbers for politicians to sign up to - especially when it is consumers who will be covering a big chunk of those costs, at a time when energy bills and the cost of living are the subject of political debate. Ministers may want to take credit for kick-starting Britain's nuclear renaissance, but no one wants to go down in history for casually signing consumers up to billions of pounds in unnecessary costs. These are also fundamentally complex talks; the headline strike price is just one part of the equation. As Robert Coates, analyst at Citigroup, explains, the devil will be in the detail. Issues like how "the reference power price and who bears the different aspects of construction risk" will, he says, be of crucial importance. EDF may insist that it has provided robust cost estimates, but the contract must address the crucial question of what happens if the project - like Flamanville - is not delivered on time and on budget. The allocation of risk in turn makes a huge difference to the returns EDF will require. Compared with other forms of power plant, nuclear has uniquely high upfront costs and a long lead-time. That leaves developers servicing billions of pounds of debt for years before the plant starts generating earnings. Some have suggested it would be far cheaper for ministers to build the reactors themselves. Instead, the Treasury has opted to help reduce risk with a loan guarantee, acting as a backstop for up to £10bn of debt. This should reduce the cost of capital, but exact terms are not yet pinned down. Meanwhile, EDF has been seeking assurances about the robustness of the contract. "The specific details around any protection clauses designed to prevent future governments clawing back value from the contract will also be key given recent events, and the on-going risk of future changes to energy policy change or measures to reduce the pressures on consumer bills," Coates says. Given the political sensitivity and the details involved, the delays are "unsurprising." Yet even if agreement comes, it will not be the end of the story. The project will need to clear European Union state aid approval; several requests, covering different aspects of the contract are believed to have been submitted by the Government. "The state aid process can appear opaque," Chris White, partner at law firm Pinsent Masons says. If the EU decides to investigate, it may take up to 18 months to conclude. If state aid approval is denied, it is the company that is liable to repay any unjustified aid. Both EDF and the Government have long suggested that they are confident they will get approval - but there is little clarity on when that will be granted. "It is very important that we clarify this clearance to make our final investment decision" de Rivaz has said. Agreement on a contract and EU approval would constitute "commercial close." But, as de Rivaz told staff earlier this year, that would be the first step. The second step will be to finalise the funding for the project. That means EDF getting other investors on board. EDF needs to replace Centrica - and more. With its own balance sheet stretched, it is looking to sell up to a 49pc stake in the project. "If we have a deal with government which is attractive to investors, we will secure the funding," de Rivaz said. Analysts say EDF would require a much higher strike price if it were to bear all the construction risk itself. "If they came out and announced EDF is accepting £90/MWh and taking all the construction risk, I wouldn't believe it," said Lakis Athanasiou, a utilities analyst at Agency Partners. China's General Nuclear Power Group has long been seen as the likely candidate; both Davey and Fallon have met the group in recent months, and there is widespread optimism that they will take a stake. But not all in Westminster are relaxed about China's role in a project of such national significance, and any deal is likely to face scrutiny. Without doubt, agreement over subsidies would bring Britain's nuclear renaissance closer than ever before. But only when state aid approval and funding are all in place, and EDF takes a positive final investment decision, will ministers finally be able to say with confidence that the sun is rising on a new nuclear age.