Centrica Plc (CNA.L), which owns British Gas, on Monday said it has decided to not participate in the construction of up to four new European Pressurised Nuclear Reactors in the UK. The company also launched 500 million pounds share repurchase program.
According to the company, there has been progress in a number of key project areas, particularly design and planning, but there remains uncertainty about overall project costs and the construction schedule.
Centrica added that its 20 percent share of the pre-development expenditure will be written off as an exceptional cost in its 2012 results.
The company in 2009 acquired a 20 percent interest in EDF Energy's eight operational nuclear power stations in the UK and also took an option for a 20 percent interest in the construction of new nuclear power stations at Hinkley Point and Sizewell. The acquisition was funded through a 2.2 billion pounds Rights Issue, completed in 2008, part of which provided financing for the investment in new nuclear.
As part of the 2009 transaction, EDF Energy, of EDF Group SA (EDFEF.PK), and Centrica formed an 80/20 joint venture to undertake pre-development activities for a nuclear new build program, with the intention of constructing, operating and decommissioning four European Pressurised Nuclear Reactors.
Centrica said its decision not to proceed follows a detailed appraisal of the project. The company said the pre-development expenditure on the project was approaching the agreed 1 billion pounds cap.
Sam Laidlaw, Chief Executive of Centrica, said, "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,"Laidlaw added.
Centrica noted that its 20 percent interest in the eight existing nuclear power stations in the UK is unaffected by this decision.
Following its decision not to proceed with the new nuclear investment, Centrica said it will launch the share repurchase program, to return surplus capital to shareholders, which will be conducted over the next 12 months.
The company is due to present its preliminary results and will provide an update on strategy and investment plans across the firm on February 27.
In London, Centrica shares are currently trading at 357.10 pence, up 4 pence or 1.13 percent.
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