Downing Street has approved the final investment decision to go ahead with the Sizewell C nuclear plant, with the government taking a 44.9% stake, with British Gas owner Centrica PLC (LSE:CNA) and three other companies investing the rest.
A £38 billion cost has now been estimated for the construction of the 3.2 gigawatt nuclear power station in Suffolk, up from £20 billion, though this will be split between consumers, taxpayers and private investors.
Centrica said it was investing £1.3 billion for a 15% stake, while French rival EDF is contributing £1.1 billion for 12.5%, alongside two infrastructure investors.
They are Canadian institutional investor La Caisse, which is taking a 20% holding, and International Public Partnerships Ltd (LSE:INPP), the final 7.6%.
With taxpayers contributing to the build cost, the government said it will ensure the impact on consumer bills is limited to an average of around £1 per month during construction, with the nuclear plant to deliver £2 billion of electricity system savings, on average, once operational.
Support
Centrica said its stake will be supported through a regulated asset base model, where there is protection against construction cost overruns and delays.
A portion of the financing for the project will come from regulated charges on electricity consumers, rather than solely from private investors.
This approach is designed to allow investors to receive a guaranteed return on investment throughout the project's lifetime, with costs shared between consumers and the investors.
Centrica said returns during construction and initial operations include a real return on equity of 10.8% and an internal rate of return above 12% under moderate scenarios.
The FTSE 100 company expects its equity share of the regulated base to reach £3 billion once the plant is commercially operational.
Build big
Energy Secretary Ed Miliband said: "It is time to do big things and build big projects in this country again - and today we announce an investment that will provide clean, homegrown power to millions of homes for generations to come.
"This government is making the investment needed to deliver a new golden age of nuclear, so we can end delays and free us from the ravages of the global fossil fuel markets to bring bills down for good."
The investment will be the National Wealth Fund's first investment in nuclear energy, as it provides the majority of the project’s debt finance, working alongside Bpifrance Assurance Export, to help support the building of the power plant.
Centrica expects revenue commencement in the fourth quarter of 2025, with the plan predicted to contribute £50 million of EBITDA per year by 2028 and £150 million per year immediately pre-operations.
Investing in Britain
Centrica CEO Chris O’Shea said: "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 expected to supply about 7% of UK electricity demand and operate for at least 60 years.