Centrica (CNA) has announced it will launch a £500m share buy-back with funds freed up by walking away from its partnership to build four new pressurised nuclear reactors with French utility EDF Energy. The decision is a major blow to the role of nuclear in Britain's energy future and means the UK will be entirely dependent on overseas suppliers from France, Japan and possibly China for the next generation of nuclear power.
EDF Energy have insisted the decision will not jeopardise plans to build four new nuclear power plants and is understood to be in discussions with a number of Chinese groups including state-run China Guangdong Power for the Centrica stake. Centrica said as the project had approached the agreed £1bn cap they had taken the decision not to proceed. As a result of the decision, Centrica will take a £200m charge in the current year for costs already incurred in the joint project.
In 2009 Centrica raised £2.2bn through a rights issue to purchase a 20 per cent interest in EDF Energy's eight operational nuclear power stations and this deal included a 20 per cent option for new build. Costs in new nuclear have been rising ever since the Fukushima disaster in Japan raised fears over the safety of existing designs. Sam Laidlaw, chief executive, said: "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 added that its interest in the remaining operational nuclear power plants was unaffected by the decision. Analysts from Liberum Capital estimate the buy-back represents around 2.7 per cent of the company's market capitalisation and subsequently lifted full-year adjusted EPS forecasts for 2014 from 29.8p to 30.5p.
