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Centrica buys into EDF's UK nuclear business

British Gas' owner Centrica is investing £2.3 billion (€2.5 billion) in the EDF Group's UK nuclear power business.
Centrica will buy a 20% stake in Lake Acquisitions, the vehicle company set up by EDF to buy nuclear power operator British Energy.

British Energy is the UK's largest electricity generator, employing over 6,000 people. It operates eight UK nuclear power stations which Centrica has now agreed to invest in.

Centrica will acquire a 20% interest in return for a cash payment of £2,289 million. EDF will operate British Energy, with Centrica having board representation.

The new agreement between EDF and Centrica will see Centrica invest in the creation of the next generation of nuclear power stations which are being developed to meet UK electricity demand.

EDF and Centrica have agreed to form an 80/20 joint venture to build four European Pressurised Reactors (EPRs) in the UK. Last year, EDF announced its intention to have the first reactor operational by the end of 2017. These new reactors will in part replace British Energy's existing power stations (which are scheduled to be decommissioned between 2014 and 2035).

Centrica will have the right to take up to a 20% interest in the New Nuclear Build (NNB) joint venture and once it is operational, will be entitled to its pro rata share of British Energy's output and an additional 18TWh of power from EDF (over five years from 2011) at market prices.

Centrica's offtake is expected to result in Centrica being able to supply 85% of its customers' peak electricity requirements from its own resources (27% higher than in 2008).It will also give Centrica access to significant volumes of power without exposure to gas prices.

Centrica is the largest energy supplier to Britain's domestic market and at the end of 2008 had 43% of Britain's domestic gas market and 22% of Britain's domestic electricity market.

Roger Carr, chairman of Centrica, said: 'We are delighted to have successfully concluded an agreement with EDF as a world leader in nuclear power. The deal represents good value for Centrica shareholders, improves the strategic balance of our business and further underpins our green energy credentials'.

Centrica has also agreed to sell its 51% interest in the Belgian generation and supply business SPE to the EDF group for €1,3 billion (£1.2 billion). At the year ended December 31, 2008, SPE was the second largest electricity generator in Belgium, representing 11% of Belgium's total electricity production capacity. SPE's profit before tax was €38 million.

Centrica will receive consideration of €1,325 million (equivalent to £1,180 million) for the SPE disposal.

Pierre Gadonneix, chief executive of EDF, said: 'This transaction, part of the group's strategy of developing its positions in Europe, will enable leading British generator, Centrica, alongside EDF, to take part in the re-launch of nuclear energy in the United Kingdom through an industrial partnership in a form already pioneered by EDF in China and the US. The asset swap in this deal will also see the EDF group reinforce its Benelux presence by becoming the second-largest generator in Belgium.'

Centrica's investment in British Energy and the acquisition of SPE by the EDF Group are conditional upon Centrica shareholder approval which is to be sought at a general meeting in June 2009. The transactions are also conditional upon regulatory approval in the UK and Europe which is expected to be received during the third quarter of 2009.
11 May 2009

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