Gas owner goes nuclear

May 12 2009 by Iain Laing, The Journal

BRITISH Gas owner Centrica is spending £2.3bn on a deal to secure its involvement in the UK’s next generation of nuclear power.

Centrica’s first move into the sector will see it take a 20% interest in British Energy, the power group acquired by France’s EDF last January.

As well as boosting its own production, Centrica said the tie-up made it a key player in the roll-out of new UK nuclear power stations.

Centrica and EDF will form a joint venture under which they will construct, run and decommission four longer-lasting EPR reactors, a type of pressurised water reactor similar to those already in operation in nuclear-reliant France.

Last year EDF announced its intention to build two nuclear reactors next to nuclear power stations at Sizewell and Hinkley Point, with the first due to be operational by the end of 2017.

As well as British Energy sites, EDF also owns other land which may be suitable for nuclear projects, including at Bradwell, Essex. Centrica owns enough power plants to meet about 35% of demand from its 15.5 million UK customers, but with the British Energy stake this could rise to more than 45%, reducing its exposure to volatile wholesale prices.

British Energy plants supply the UK with about one-sixth of its electricity needs. It has sites at Hartlepool, Heysham in Lancashire, Dungeness in Kent, Hinkley Point in Somerset, Hunterston in Ayrshire, Sizewell in Suffolk and Torness in East Lothian.

Yesterday’s deal, which is subject to regulatory approval, could be completed by the end of September.

The two parties have been working on a tie-up since last summer, but talks dragged on because energy prices have plunged since then.

While the agreement is less than the 25% stake envisaged last year, it values British Energy at less than the £12.4bn paid by EDF.

Centrica’s cash outlay will be £1.1bn because it is giving its 51% stake in Belgian energy supplier SPE to EDF for £1.2bn.