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Centrica pulls out of UK new nuclear projects

04 Feb 2013 13:49:17 | edem

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UK utility Centrica has cited fears of cost overruns and construction delays for its decision to shun an option to participate in EDF Energy's nuclear new build programme.

Centrica cited "uncertainty about overall project costs and the construction schedule", in a statement released on Monday, ending nine months of speculation about its future involvement in UK nuclear. The company has held a 20% interest in the construction of planned nuclear stations Hinkley Point C and Sizewell B since 2009 (see EDEM 21 September 2009).

Two other European nuclear projects using the same reactor design planned for Hinkley Point C are now several years overdue and will cost more than double their initial price. EDF's Flamanville project in France will now cost the company €8.5bn rather than the originally estimated €3.3bn.

"Since our initial investment, the anticipated project costs in new nuclear have increased and the construction timetable has extended by a number of years," Centrica chief executive Sam Laidlaw said.

"These factors, in particular the lengthening time frame for a return on the capital invested on a project of this scale, have led us to conclude that participation is not right for Centrica and our shareholders."

Centrica will retain its 20% stake alongside EDF in eight existing UK nuclear plants, many of which have seen their useful lives extended.

EDF, meanwhile, reiterated its commitment to its new-build programme, and particularly to the first 1.6GW Hinkley Point C reactor, on which a final investment decision is imminent.

"The new nuclear project at Hinkley Point C is making good and continuous progress. EDF Energy is working with government to agree a price for the electricity at Hinkley Point Cthis Contract for Difference is now more than ever the key to attracting investors and to unlock the funding for this project," EDF chief executive Vincent de Rivaz said.

Several market sources have previously told ICIS they believe that EDF's balance sheet lacks the firepower to fund the construction of new nuclear plants (see EDEM 21 January 2013).

EDF now faces finding another investment partner to share the heightened financial risks involved in nuclear new build. The company is locked in negotiations with the Chinese state-owned China Guangdong Nuclear Power Corp.

Neither EDF nor the Department of Energy and Climate Change (DECC) would comment on whether Centrica's pull-out would affect the strike price negotiations, or when a decision was likely to be reached.

"The decision by Centrica reflects the company's investment priorities and is not a reflection on UK government policy," DECC said.

DECC's new capacity estimates, released last October, show that it does not expect the first Hinkley Point C reactor to be operational until 2020. When the project was first conceived several years ago, EDF said it would come on line by 2017. Kate Burgess

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