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Centrica abandons N-plants project
Centrica has decided to pull out of the UK's nuclear new build programme and will not take part in the construction of up to four new reactors, the firm has announced.
The British Gas-owned company acquired a 20% interest in French firm EDF Energy's eight nuclear power stations in the UK and an option for a 20% stake in the building of new power stations at Hinkley Point in Somerset and Sizewell in Suffolk.
Centrica said in a statement: "Centrica plc has taken the decision not to participate in the construction of up to four new European pressurised nuclear reactors in the UK."
The statement went on: "Having taken the decision not to proceed with the new nuclear investment, the group will launch a £500 million share repurchase programme, to return surplus capital to shareholders, which will be conducted over the next 12 months.
"With pre-development expenditure on the project approaching the agreed £1 billion cap, Centrica's decision not to proceed follows a detailed appraisal of the project. While there has been progress in a number of key project areas, particularly design and planning, there remains uncertainty about overall project costs and the construction schedule."
Centrica said its 20% share of the pre-development expenditure - around £200 million - will be written off as an exceptional cost in the group's 2012 results.
Chief executive Sam Laidlaw said: "We believe that nuclear generation has a valuable role to play in a balanced UK energy mix. Centrica and EDF continue to enjoy a successful partnership in existing nuclear. However, since our initial investment, the anticipated project costs in new nuclear have increased and the construction timetable has extended by a number of years.
"These factors, in particular the lengthening timeframe for a return on the capital invested in a project of this scale, have led us to conclude that participation is not right for Centrica and our shareholders. In 2012 we invested over £2 billion in securing supplies of energy for the UK and where we see attractive returns we will continue to invest in Britain's energy future."
Centrica said its 20% interest in the eight existing nuclear power stations in the UK is unaffected by the decision. The company is due to present its preliminary financial results on February 27, when it will provide an update on strategy and investment plans.
Analysts believe the decision clears the way for Chinese investors to take over Centrica's involvement.