Centrica pulls out of new UK nuclear projects

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Image caption Centrica's decision means other investors are likely to be sought

Centrica has withdrawn from the UK's nuclear re-building programme because of increasing costs and delays.

The move further reduces the involvement of UK companies in the massive nuclear project.

Centrica, which owns British Gas, had the option of taking a 20% stake in four new reactors in a partnership with EDF, the French state-owned utility.

Centrica said "the project costs in new nuclear have increased and the construction timetable has extended".

The nuclear plants being proposed by EDF would be the first such facilities to be built in the UK since 1995. Without Centrica's investment, the companies behind the projects are likely to have to find alternative backers.

Last month, EDF said it would start discussions with Chinese state-owned nuclear company CGNPC about joining the partnership to build the next generation of UK nuclear plants.

Centrica's move follows a decision by German utilities E.On and RWE to quit the nuclear sector after Japan's Fukushima disaster in 2011. In October, they sold their interest in Horizon Nuclear Power, which was to build reactors at sites near Anglesey and Bristol, to Japan's Hitachi.

Centrica's 20% interest in the eight existing nuclear power stations in the UK is unaffected by the decision.

Centrica's intention had been to get involved in the two new reactors at Hinkley Point, in Somerset, and two at Sizewell, in Suffolk.

'Not right for Centrica'

The company said in a statement: "With pre-development expenditure on the project approaching the agreed £1bn cap, Centrica's decision not to proceed follows a detailed appraisal of the project.

"While there has been progress in a number of key project areas, particularly design and planning, there remains uncertainty about overall project costs and the construction schedule. Centrica's 20% share of the pre-development expenditure will be written off as an exceptional cost in the group's 2012 results."

The company's chief executive, Sam Laidlaw, added in the same statement: "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."

Later, at a news conference, he added that the Fukushima disaster had had a "knock-on impact" on the schedule to build plants in the UK.

A Department of Energy and Climate Change spokesman said: "We are determined to make the UK a leading global destination for investment in new nuclear, which will play a key role in our future energy mix.

"We welcome EDF Energy's continued commitment and determination to take forward the Hinkley Point C project. The decision by Centrica reflects the company's investment priorities and is not a reflection on UK Government policy.

"The recent purchase of Horizon Nuclear Power by Hitachi is clear evidence of the attractiveness of the new nuclear market in the UK."

EDF said it respected Centrica's decision, adding: "EDF Energy was prepared for this decision and understands that the profile and scale of this investment may not meet Centrica's shareholders' current expectations and priorities."

Centrica's news follows publication on Monday of a report by the Commons Public Accounts Committee which showed that the "enormous" legacy of nuclear waste at Sellafield in Cumbria had been allowed to build up,

It said the cost of decommissioning the site had reached £67.5bn, with no indication of when the expense would stop rising.

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