Centrica (LSE: CNA) this morning reported that it has taken the decision not to participate in the UK construction of up to four new European pressurised nuclear reactors.
In order return surplus capital to shareholders, Centrica has announced that it will launch a £500m share buy-back scheme, conducted over the next 12 months.
The decision not to proceed follows a detailed appraisal of the project, with pre-development expenditure on the project approaching the agreed £1bn cap, and uncertainty about overall project costs and the construction schedule.
In 2009, Centrica acquired a 20% interest in EDF Energy's eight operational nuclear power stations in the UK and also took an option for a 20% interest in the construction of new nuclear power stations at Hinkley Point and Sizewell. The acquisition was funded through a £2.2bn rights issue, completed in 2008, part of which provided financing for the investment in new nuclear.
Chief executive Sam Laidlaw commented:
"We believe that nuclear generation has a valuable role to play in a balanced UK energy mix. Centrica and EDF continue to enjoy a successful partnership in existing nuclear. However, 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. 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."
Management stated that Centrica's 20% interest in the eight existing nuclear power stations in the UK is unaffected by this decision.
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