February 5, 2013

Centrica pulls out of UK nuclear project over cost concerns

The Financial Times reported that Centrica would not exercise its option to take a 20 per cent stake in EDF's plans for two new reactors at Hinkley Point and Sizewell, amid concerns about the cost of the projects.

Centrica, owner of British Gas, has 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 – in a partnership with EDF, the French state-owned utility. These would be the first nuclear power plants to be built in the UK since 1995.

Centrica's 20 per cent share of the pre-development expenditure (£200m) will be written off as an exceptional cost in the Group's 2012 results.

A central factor in Centrica's expected decision is the financial risks associated with new nuclear. Company officials have pointed to Flamanville, an EDF reactor under construction in northern France, which is years behind schedule and billions over budget. EDF announced in December that the price tag for Flamanville had ballooned to €8.5bn, compared with an original budget of €3.3bn.

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