Centrica has withdrawn its plans to participate in the UK nuclear new-build programme amid uncertainties over the construction schedule and pre-development expenditure on the project approaching the agreed £1bn cap.
In 2009, Centrica purchased a 20% stake in EDF Energy’s eight operational nuclear power stations in the UK and had the option to purchase a 20% interest in the construction of four nuclear reactors at Hinkley Point and Sizewell.
But while the project is experiencing progress in several key areas, specifically design and planning, Centrica said the anticipated project costs have mounted up and the construction timetable has been extended by ‘many more years’ since its initial investment.
Centrica chief executive Sam Laidlaw said: "These factors, in particular the lengthening time-frame 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 £2bn in securing supplies of energy for the UK and where we see attractive returns we will continue to invest in Britain’s energy future." Laidlaw added.
Centrica’s decision does not affect its 20% interest in the eight existing nuclear power stations in the UK.
"We believe that nuclear generation has a valuable role to play in a balanced UK energy mix," said Laidlaw. "Centrica and EDF continue to enjoy a successful partnership in existing nuclear."
Centrica, which owns British Gas, said it would write off the pre-development expenditure as an exceptional cost in the Group’s 2012 results due this month.
EDF Energy said in a statement that it was prepared for the decision and ‘understands’ that the profile and scale of this investment may not meet Centrica’s shareholders’ current expectations and priorities.
EDF Energy CEO Vincent de Rivaz said: "Centrica’s decision underlines the challenge this represents for the government. Our discussions with the government on the CFD are based on well understood and stable costs and a timetable, which has already taken account of all the events since 2009 when Centrica joined the project."
Responding to the news, a Department of Energy and Climate Change (DECC) spokesman said: "The recent purchase of Horizon Nuclear Power by Hitachi is clear evidence of the attractiveness of the new nuclear market in the UK."
Image: Western End of Hinkley Point Nuclear Power Station; Photo: courtesy of Richard Baker.