Centrica (CNA) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of a 15% stake in a major UK nuclear project aligns with the strategy to grow regulated, net zero-aligned infrastructure earnings and support national energy security and decarbonisation.

• The project is expected to provide zero-carbon baseload power for about 6 million homes, supplying around 7% of UK demand over a 60+ year operational life.

• Participation in a government-backed public-private partnership offers board representation, blocking rights, and future options such as right of first offer in government sell-downs.

• Project leverages Hinkley Point C design, with over 80% replication, reducing development risk and improving efficiency.

• Investment supports predictable earnings, credit metrics, and creates thousands of jobs, boosting the local economy.

Financial terms and conditions

• 15% equity stake with phased investment capped at £1.3 billion; about £800 million expected to be returned in cash pre-commercial operations, resulting in a net investment of £500 million.

• Allowed return on equity of 10.8% real (WACC 6.7%), with IRR guided above 12% in base case and at least 10% in downside scenarios.

• Shareholder loan structure pays a 9% coupon, with 6% in cash and 3% rolled up, contributing to RAB growth.

• EBITDA contribution expected to be about £50 million by 2028, rising to £150 million by commercial operations.

• Sizewell C's capital cost estimated at £38 billion, with commercial operations expected mid- to late-2030s.

Synergies and expected cost savings

• Project leverages design learnings from Hinkley Point C and a world-class consortium to reduce risk and improve efficiency.

• Incentives and cost sharing mechanisms are in place to deliver the project on time and below budget, with 50% of cost savings added to the RAB.

• Operational incentives include sharing of cost savings and market price outperformance.

• Centrica Energy will help bring additional electrons to market, aiming to secure better prices and generate profitable activity.