Centrica on brink of British Energy deal

Centrica and France’s EDF were today reported to be on the brink of a deal that will give the British Gas owner an entrance into the nuclear sector.

Under the agreement, Centrica will buy a 25% stake in British Energy from EDF, which completed the £12.5bn (€14bn) takeover of the nuclear generator in January.

The two parties agreed the £3.1bn (€3.5bn) side deal in principle last summer, but talks have dragged on because energy prices have plunged since then.

The key to recent progress has been Centrica’s ownership of a 51% stake in Belgian power generator SPE, an asset seen as attractive to the French company. The SPE stake is thought to be worth at least £1.2bn (€1.35bn), but EDF could pay more than that to offset the fall in British Energy’s value.

Newspaper reports said the parties were working towards a deal in time for Centrica’s annual meeting in London tomorrow.

The deal is seen as a strategic priority for Centrica, as the British Gas owner looks to boost upstream assets and protect itself against volatile energy markets. It raised £2.2bn (€2.5bn) from shareholders in November in order to help pay for the stake purchase.

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

It is the potential of some of the sites for new reactors which has made British Energy an attractive asset.

EDF plans to construct and operate two new reactors each at Hinkley Point and Sizewell. It will build longer-lasting EPR reactors, which are a type of pressurised water reactor, similar to those already in operation in nuclear industry-reliant France.

Centrica currently owns enough power plants to meet about 30% of demand from its 16 million UK customers, but with the British Energy stake this could rise to more than 40%.

Chief executive Sam Laidlaw hopes the British Energy deal will make Centrica a “much more integrated company”.