REG - Centrica PLC - Investment in Sizewell C

CentricaAnnouncement

22/07/2025 07:00

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RNS Number : 0271S  Centrica PLC  22 July 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION.

 

Centrica plc

22 July 2025

 

Investment in Sizewell C

Centrica plc (the "Company") is pleased to announce it has signed an agreement
to acquire a 15% equity stake in Sizewell C (Holdings) Limited ("Sizewell C"),
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

o  10.8% Allowed Return on Equity (real CPIH; WACC 6.7% real CPIH(1)) during
construction and initial operations period

o  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.

 

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."

 

Transaction background

Regulated returns supported by a long-term framework

Sizewell C benefits from a regulatory and contractual framework designed to
mitigate key nuclear-specific risks associated with previous nuclear new build
projects, and which includes a funding model that spreads the cost and risk of
constructing Sizewell C between consumers, taxpayers and private investors.
The key components of the framework are the RAB model, providing protection
against cost overruns and delays, and a Government Support Package to protect
against low-probability, high-impact risks during both construction and
operations. Centrica's investment in Sizewell C will be added to the RAB
during construction and the Secretary of State has set the real Allowed Return
on Equity for the RAB during construction and initial operations at 10.8%
(WACC of 6.7% real).

 

Sizewell C plans to deliver the project at a capital cost of around £38
billion(4), with a commercial operations date commencing in the mid-to-late
2030s. Centrica will work hard to achieve these targets, alongside our
partners.

 

To incentivise this, the government has set two regulatory thresholds - the
Lower Regulatory Threshold ("LRT") which is based on a moderate outturn on
cost and schedule, and the Higher Regulatory Threshold ("HRT") which is based
on a severe outturn on cost and schedule - around which the government has
calibrated incentives which relate to delivering the project on time and below
budget, with no other penalty or incentive mechanisms in the construction and
initial operations phase, providing clear visibility on returns.

 

Up to the LRT, 100% of construction costs will be added to the RAB plus 50% of
the cost savings below LRT. Centrica's returns are presented on an LRT
scenario. Between the LRT and the HRT, 50% of additional construction costs
will be added to the RAB. Above the HRT, in the event further funding is
unavailable from the private market, HM Government has committed either to
provide the required funding or to discontinue the project and provide
compensation to investors in respect of the RAB as at the discontinuation
date. Returns continue to accrue during construction in the event of delay.

 

Following the end of the construction and initial operations phase, Ofgem will
assume its full regulatory role for the operations phase, with the regulatory
framework detailed in the economic licence establishing 5-yearly periodic
reviews at which Ofgem will confirm the regulated return and calibrate the
incentives regime. Ofgem is expected to draw on established and
well-understood principles of network regulation, and has indicated that it
will take account of the specific nature of this nuclear asset relative to
networks when periodically setting the regulated return for the project. The
project also benefits from additional protections, with revenue support
available in certain circumstances, and with the cumulative impact of most
incentives being bounded.

 

Centrica's IRR is above 12%(2) based on an LRT scenario. Centrica's IRR is
above 10%(2) based on a HRT scenario.

 

Investment supports Centrica's strategy and financial framework

This investment forms part of Centrica's £4 billion green-focused investment
programme and guidance through to the end of 2028. We expect gross investment
of approximately £500 million cumulatively through to the end of 2028 and
over £1 billion cumulatively by the end of 2033. Sizewell C is expected to
contribute approximately £50 million of EBITDA per annum to Centrica by the
end of 2028 and around £150 million per annum immediately pre-operations,
with a significant acceleration once the plant enters the operational phase.

 

We now have £2.5 billion (approximately 65%) of our investment programme
committed, of which around £1.7 billion is committed to assets with regulated
or contracted earnings, including Sizewell C. The remaining £1.5 billion of
uncommitted investments will be deployed with a continued focus on attractive
returns, and a significant opportunity set is under review.

 

Background to Sizewell C

Sizewell C is a new 3.2GW nuclear power station under construction in Suffolk,
in the South East of the UK. Once operational, Sizewell C will generate enough
reliable, affordable sustainable electricity equivalent to approximately 7% of
the UK's current demand.  The project will have two European Pressurised
Reactors and has been significantly de-risked through design learnings from
Hinkley Point C. It will support 10,000 jobs at peak construction and
thousands more across the nationwide supply chain, as well as creating 1,500
apprenticeships during construction, and provide at least 60 years of
electricity generation to power six million of today's homes. Sizewell C
benefits from a unique regulatory framework covering the entire construction
and operations period, with long-term UK government commitment and cross-party
political support. Our investment will allow Sizewell C to contribute to the
UK's baseload power generation, support the UK's net zero ambitions, and help
maintain grid stability as more intermittent renewable generation is added to
the energy mix.

 

Investor presentation

Centrica will hold a question and answer session on the investment for
analysts and institutional investors at 9.30 am (UK) on 22 July 2025. A
presentation on the transaction will be available at
www.centrica.com/sizewellc shortly after the release of this announcement and
should be viewed prior to the Q&A session.

 

Please register to participate in the Q&A session via webcast at:
https://secure.emincote.com/investor-call/2025qanda
(https://secure.emincote.com/investor-call/2025qanda)

 

You may also listen to the Q&A session via conference call. To register
and receive a unique caller reference number, please visit:
https://secure.emincote.com/investor-call/2025qanda/vip_connect
(https://secure.emincote.com/investor-call/2025qanda/vip_connect)

 

Questions may be submitted via the chat function in the webcast, or asked
verbally via the conference call.

 

Interim results

Centrica will release its 2025 Interim Results on Thursday 24(th) July.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Raj Roy, Group General Counsel & Company
Secretary.

 

Enquiries:

 Centrica
 Investors and Analysts:                              email: ir@centrica.com (mailto:ir@centrica.com)
 Media:                                               email: media@centrica.com (mailto:media@centrica.com)

                                                      tel: +44 (0) 1784 843000

 UBS AG London Branch (Financial Adviser and Broker)  tel: +44 (0) 20 7567 8000

 Jonathan Grundy

 David James

 James Donovan

 George Vowden

 Christopher Binks

 

Slaughter and May is acting as legal adviser to Centrica.

 

Notes

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.

4.     Real 2024 basis.

 

Disclaimer

UBS AG London Branch ("UBS") is authorised and regulated by the Financial
Market Supervisory Authority in Switzerland. It is authorised by the
Prudential Regulation Authority and subject to regulation by the Financial
Conduct Authority and limited regulation by the Prudential Regulation
Authority in the United Kingdom. UBS are acting as financial adviser
exclusively for Centrica and no one else in connection with the matters set
out in this announcement. In connection with such matters, UBS, its
affiliates, and it's or their respective directors, officers, employees and
agents will not regard any other person as its client, nor will it be
responsible to any other person for providing the protections afforded to its
clients or for providing advice in relation to the contents of this
announcement or any other matter referred to herein.

 

This information contains regulated information as per Disclosure Guidance and
Transparency Rule (DTR) 6.3.7R.

 

END

 

 

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