* Longer schedule, higher costs led to decision -CEO
* Centrica to launch 500 mln pound share buyback
* Pressure on UK government to clarify power market reform
By Lorraine Turner and Karolin Schaps
LONDON, Feb 4 Utility Centrica has
pulled out of plans to build new nuclear power stations in
Britain with partner EDF, paving the way for Chinese
investors to enter the UK market through a partnership with the
Centrica said it had decided to waive an option of taking a
20 percent stake in four new reactors - two at Hinkley Point in
Somerset and two at Sizewell in Suffolk.
Centrica's decision was largely expected, but it casts some
doubt on the UK government's plan to attract investment to
revive the nuclear industry.
"There are multiple factors at play here but the bigger
factor is actually the (longer) schedule and the increase in
cost, which obviously creates a higher economic challenge for
this project," Centrica Chief Executive Sam Laidlaw told
journalists on a conference call on Monday.
China's CGNPC has already held preliminary talks with French
state-owned utility EDF about a partnership in the project,
which would be the first Chinese investment in Britain's nuclear
In its past experience in building European Pressurised
Water reactors in Europe, EDF and its partner on these projects,
Areva, have run into huge cost overruns and delays.
Centrica said it had invested around 200 million pounds
($315 million) in early development of the project, which it
plans to write off as an exceptional cost in 2012 results.
The utility plans within the next year to launch a 500
million pound ($787 million) share buyback scheme to return
value to shareholders, following a 2.2 billion pound rights
issue in 2008 to finance the acquisition of a stake in the
project with EDF.
EDF Energy, the French company's UK arm, said it respected
Centrica's decision and that momentum behind its first UK
nuclear new build project remained strong.
Centrica's withdrawal, however, piles pressure on the
government to quickly deliver details on its planned electricity
market reform to reassure investors.
Since mid-2011 three utilities active in the UK market, SSE
, E.ON and RWE, have pulled the plug
on investing in new nuclear plants in the aftermath of Japan's
Fukushima crisis and as costs have spiralled.
"(Centrica's decision) sends a signal to government that
it's absolutely vital it gets EMR (Electricity Market Reform)
sorted out very quickly, because the continued uncertainty isn't
helping people make those investment decisions," said Karen
Dawson, energy strategies director at consultancy PwC.
The government has proposed to reform the electricity market
in a way that incentivises developers to build low-carbon types
of energy, including nuclear plants, but details such as
guaranteed price levels for power are still missing.
A spokesman for the energy ministry, which leads the reform
proposals, said Centrica made a company-specific decision and
that it did not reflect UK government policy.
Centrica will retain its 20 per cent stake in eight existing
British nuclear power stations.
The utility's shares were down 0.51 percent at 12:51 GMT,
while the FTSE 100 was down 0.91 percent.