Scottish Gas owner Centrica backs out of nuclear deal

SCOTTISH Gas owner Centrica is withdrawing from plans to build nuclear power stations with partner Electricite de France, and will instead return £500 million to shareholders.

Centrica had the option of taking a 20 per cent stake in four new reactors, two at Hinkley Point in Somerset and two at Sizewell in Suffolk.

But the group yesterday cited uncertainty about the lengthening construction schedule and project costs for its decision not to take up its option on nuclear new build with the French giant.

Centrica acquired a 20 per cent interest in EDF Energy’s eight existing nuclear power stations in the UK in 2009, along with the option for a stake in the stations yet to be built.

But Sam Laidlaw, its group chief executive, said yesterday that “since our initial investment, the anticipated 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”.

The company’s 20 per cent stake in EDF Energy’s existing UK nuclear plants is unaffected by yesterday’s decision.

Laidlaw added that he believed nuclear generation still “has a valuable role to play” in achieving a balanced UK energy mix. “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,” he said.

Nick Luff, Centrica’s finance director, said there would be a write‑off of about £200m in the group’s 2012 accounts for Centrica’s pre-development expenditure on the current agreed £1bn cap.

Luff said: “I think the institutions will welcome the share buyback. They supported the £2.2bn rights issue to acquire the stake in EDF Energy. But, as a sign of financial discipline, if we don’t need all of that money now it’s only right we return it.”

Centrica also owns British Gas and has a growing North American business. EDF Energy said in a statement that it “respects Centrica’s strategic decision not to take up its option of a share in the project.

“EDF Energy was prepared for this decision and understands that the profile and scale of this investment may not meet Centrica’s shareholders’ current expectations and priorities”.

However, it said the nuclear new-build project was progressing well.

EDF said last month that it would start talks with Chinese state-owned nuclear company CGNPC about a possible joint venture to build the next generation of nuclear plants in Britain.

EDF Energy chief executive Vincent de Rivaz said: “The new nuclear project at Hinkley Point C is making good and continuous progress.”