Centrica (LSE: CNA) has opted not to take up its option of a 20 per cent state in building nuclear power plants in England, and is in effect pulling out of the UK’s new nuclear drive.
The British Gas owner is to lose $314m from opting out of the programme as concern about costs of the projects now sees no British involvement in the three consortiums to build new nuclear plants to bridge the country’s impending energy gap.
Centrica, under the guidance of Chief executive Sam Laidlaw, will leave the project having spent virtually all its share of the $1.57bn in upfront costs that the companies had budgeted to the end of 2012.
The company is concerned about its capacity to meet the projects financial criteria, as the cost of reactors has gone up from $7bn to $11bn each. It is likely to focus on US expansion instead.
In a statement Centrica said “the project costs in new nuclear have increased and the construction timetable has extended”.
Sam Laidlaw added: “Since our initial investment, the anticipated project costs in new nuclear have increased and the construction timetable has extended by a number of years.
“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.”Centrica will retain its 20 per cent stake in eight existing nuclear power plants in the UK.
George Borovas, head of the international nuclear projects team at global law firm Pillsbury, said Centrica’s decision underscores the challenge that new build projects will have to face in the UK and worldwide, but said the move shouldnt be interpreted as a lack of confidence in the UK programme.
“Investment in new nuclear presents a unique risk profile which may be suitable for some companies and not for others. New investors will quickly move to take Centrica’s position and Prime Minister Cameron and the British Government’s hard work to attract foreign investment will likely pay off in this case.
“The international nuclear industry learns valuable lessons from each and every new build. Recent projects around the world demonstrate, more than ever, the importance of the utilization of experienced human resources who can capitalise on construction and operational lessons learned. Asian countries have significant recent nuclear construction experience as well as the benefit of liquidity and easier access to capital.
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