Centrica has signed an agreement to acquire a 15% equity stake in Sizewell C (Holdings), with committed construction funding of £1.3 billion.
Centrica will jointly own Sizewell C alongside HM Government (44.9%), La Caisse (20%), Électricité de France SA ('EDF') (12.5%) and Amber Infrastructure Group (7.6%, with an option to acquire a further 2.4% from HM Government exercisable within 24 months of Revenue Commencement).
Key highlights
- Regulated Asset Base ('RAB') model with no pre-productive capital period
- Incentives to deliver the project on time and on budget, with robust protections against construction delays and cost overruns
- Inflation-protected, regulated returns
- 10.8% Allowed Return on Equity (real CPIH; WACC 6.7% real CPIH(1) during construction and initial operations period
- IRR >12%(2)
- Phased investment capped at £1.3 billion (nominal) for 15% stake
- Centrica’s equity share of the RAB expected to grow to around £3 billion at commercial operations date(3)
- Regulated returns and incentives during the operations phase to be set by Ofgem will draw from established principles of network regulation, with additional protections
- Agreement in principle for initial 20-year offtake agreement for our share of Sizewell C’s production, and for Centrica to provide Sizewell C with route to market services for additional volumes
- Rebuilding Centrica’s infrastructure portfolio, with regulated assets that deliver predictable earnings and are supportive to credit metrics.
From today, a set of procedural steps will begin which include finalising Sizewell C’s economic licence. A final statutory decision by the Secretary of State will follow, after which Revenue Commencement will be declared and the transaction completed. We expect Revenue Commencement to take place in the fourth quarter this year.
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Chris O'Shea, Group Chief Executive, Centrica plc, said: 'The UK needs more reliable, affordable, zero carbon electricity, and Sizewell C will be critical to supporting the country’s energy system for many decades to come. That’s why I’m delighted to be announcing this milestone investment which will see Centrica commit £1.3 billion for a 15% equity stake in the project, and deepens our long-standing involvement in the UK nuclear industry. This isn’t just an investment in a new power station – it's an investment in Britain’s energy independence, our net zero journey, and thousands of high-quality jobs across the country.
'Sizewell C is a compelling investment for our shareholders and the country as a whole, and I look forward to working with our world-class partners, EDF, La Caisse, Amber Infrastructure Group and the UK government, to make the project a great success.'
The Rt Hon Rachel Reeves, Chancellor of the Exchequer, said: 'La Caisse, Centrica and Amber’s multi-billion pound investment is a powerful endorsement of the UK as the best place to do business and as a global hub for nuclear energy.
'Delivering next generation, publicly-owned clean power is vital to our energy security and growth, which is why we backed Sizewell C. This investment will create thousands of good quality jobs and boost the local economy as we deliver on our Plan for Change.'
Julia Pyke and Nigel Cann, Joint Managing Directors of Sizewell C, said: 'Today’s announcement marks the biggest investment in clean, homegrown energy in a generation and a major step towards delivering secure, low-carbon, electricity for the UK. Centrica’s involvement brings decades of expertise and a deep understanding of our energy system. Their backing is a powerful vote of confidence in Sizewell C and the essential role nuclear will play in a balanced, resilient energy mix.'
Background
1) WACC assumptions during construction and initial operations phase: 10.8% allowed return on equity (real CPIH), 4.5% cost of debt (real CPIH) with any changes in cost of debt passed through, 65% gearing.
2) Based on Centrica modelling assumptions. Post-tax nominal, unlevered return on Centrica’s cash investment; ~2% CPIH inflation; includes all cash flows through to the end of the construction and initial operations period, and a terminal value of 1.0x RAB (at the end of that period). For modelling purposes it is assumed Commercial Operations Date (COD) is end-2039 under LRT (in line with expected target COD under the licence, noting management estimate for COD is mid-to-late 2030s) and November 2043 under HRT.
3. Under Lower Regulatory Threshold scenario.
Source: Centrica
