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(Bloomberg) — HSBC Holdings Plc is in talks with investment funds about loans to help to finance the construction of the UK’s Sizewell C nuclear plant, as the government steps up efforts to get a key energy project off the drawing board this year. 

The bank is in discussions with funds to provide the debt that would be guaranteed by the country’s export finance agency, according to people familiar with the matter. That would help Sizewell offset risks of financing a long-term project, while securing cheaper capital, the people said, asking not to be identified as the negotiations are private.

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HSBC, Sizewell and UK Export Finance all declined to comment. A spokesperson for the Department for Energy Security and Net Zero said the development of the project’s commercial structure is subject to sensitive discussions.

Securing state-guaranteed funding would be an important milestone for a project that could cost more than £40 billion ($51 billion). The UK government has vowed to get as much as 25% of the country’s power from nuclear plants in coming years as part of a push to reach net-zero carbon emissions by 2050. Declining output from Britain’s fleet of aging reactors means new plants will be needed by the end of the decade. 

So far, the only one under construction is Electricite de France SA’s Hinkley Point C. That plant has been repeatedly delayed, while the projected budget has ballooned to as high as £47.9 billion. 

The UK government is working with Barclays Plc to drum up equity investors for the Sizewell project, with bids due later this year. Centrica Plc is seen as a potential anchor investor, with Chief Executive Officer Chris O’Shea saying the company has been in talks with the government.

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HSBC is working for Sizewell C Ltd., the operating company set up by EDF to build the copy of Hinkley. The second project should cost less than its forerunner, according to EDF.

The UK has gradually increased its own exposure to Sizewell C, boosting investment in the project to more than £2 billion earlier this year to become the majority shareholder. The government is taking on more construction risk than it did for Hinkley, as it trials a different approach to financing to try to get new projects over the line.

The huge costs involved make it tricky. In 2019, the government offered to take a third of the equity in a £20 billion project in Wales, and provide all the debt during construction plus guaranteed power prices. That wasn’t enough to convince the developer Hitachi Ltd. to proceed.

—With assistance from Jessica Shankleman and Francois de Beaupuy.

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