BRITISH GAS owner Centrica yesterday pulled out of plans to build up to four new nuclear power stations in collaboration with EDF, blaming rising costs and the construction timetable slipping.
Centrica has spent around £200m on the project, which will be written off in this year’s results. EDF is in discussions with a number of Chinese groups with an eye to taking over Centrica’s 20 per cent stake in the joint venture.
The move follows last week’s decision by Cumbria county council to reject a new £12bn nuclear waste disposal site in the Lake District, seen as vital to the UK’s nuclear expansion.
“It’s unfortunate that Centrica is the first official victim of the council’s vote but the prognosis for new nuclear builds in the UK remains extremely strong,” Cumbrian MP Jamie Reed told City A.M. yesterday.
“I expect further changes [to outside investors] as boardrooms get closer to writing cheques but am assured that contingencies are in place in case smaller operators fall by the wayside.”
The Department of Energy and Climate Change (DECC) insisted Centrica’s decision did not affect the case for nuclear expansion: “We are determined to make the UK a leading global destination for investment in new nuclear. The decision by Centrica reflects the company’s investment priorities and is not a reflection on UK government policy.”
DECC cited the recent purchase of Horizon Nuclear Power by Japan’s Hitachi – which yesterday revised down its full-year profit forecast – as “clear evidence” of the attractiveness of the new nuclear market in the UK.
Centrica will launch a £500m share buyback programme to return capital to shareholders, having previously undertaken a £2.2bn rights issue to fund its stake in the construction of new power stations at Hinkley Point in Somerset and Sizewell in East Anglia.
What’s next for UK nuclear power?
Q and A
Q What does the government want from the new nuclear programme?
A The government wants to secure long-term energy supply that will also help its meet its environmental emissions target.
Q Who has signed up to the programme so far?
A EDF is working on the first new build nuclear project at Hinkley Point C in Somerset. Japanese firm Hitachi got involved last year when it bought Horizon Nuclear Power, while questions remain over the future of a joint venture between GDF Suez and Iberdrola.
Q What barriers does the project face?
A There are three main barriers to the new nuclear project: cost, planning permission for the nuclear sites and government policy.
Q Does Centrica’s exit leave the government’s plan in tatters?
A Centrica’s partner EDF Energy said yesterday that it remains committed to Hinkley Point. It is understood that interest in Centrica’s 20 per cent stake could come from China, where a state energy company has previously expressed an interest in the venture.