Centrica bought a 20% stake in EDF Energy’s UK nuclear interests, including eight operational power stations and rights to build new ones at Hinkley Point and Sizewell.
Centrica has already spent nearly £1bn on pre-development work but will now write this off in its 2012 results.
Chief executive Sam Laidlaw 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 £2bn in securing supplies of energy for the UK and where we see attractive returns we will continue to invest in Britain’s energy future.”
Centrica’s 20% interest in the eight existing nuclear power stations in the UK is unaffected by this decision.
EDF Energy said that Centrica’s withdrawal would have no impact on its construction plans.
EDF Energy CEO Vincent de Rivaz said: “The new nuclear project at Hinkley Point C is making good and continuous progress. EDF Energy is working with government to agree a price for the electricity at Hinkley Point C which will be fair and balanced for UK consumers and investors. This Contract for Difference (CFD) is now more than ever the key to attracting investors and to unlock the funding for this project which will give the UK the secure, low carbon energy it needs for the future.
“A robust CFD will be the basis to finalise discussions with potential investors. Centrica’s decision underlines the challenge this represents for the Government. Our discussions with the government on the CFD are based on well understood and stable costs and a timetable which has already taken account of all the events since 2009 when Centrica joined the project. “
The project at Hinkley Point C is now “shovel-ready”, EDF said, with a world-class team ready to deliver a project as large as the Olympics. Detailed work is taking place to prepare UK suppliers to make the biggest possible contribution to the project and training facilities have been opened to develop the skills needed to build the project. It has the potential to employ 25,000 people during its construction and to have a lasting impact on the UK’s industrial capability, EDF said.
EDF Energy has made progress on Hinkley Point C in recent months, notably with the granting of the reactor design approval by joint regulators and the site license. A planning decision from the secretary of state is anticipated in the coming weeks.