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Investing.com -- The U.K. government on Tuesday approved the construction of the £38 billion ($51 billion) Sizewell C nuclear plant in Suffolk, clearing the way for one of the country’s biggest infrastructure projects in decades.
The project secured backing from both domestic and international investors, including Canada’s La Caisse pension fund.
The British government will be the largest stakeholder, holding 44.9% of the project. La Caisse will take a 20% stake, while Centrica PLC (LON:CNA) and Amber Infrastructure will hold 15% and 7.6%, respectively.
France’s EDF (EPA:EDF), already involved in the project, retains a 12.5% share.
Shares in Centrica popped more than 4% following the news.
The go-ahead for Sizewell C signals renewed momentum for nuclear energy in Europe, as nations work to modernize ageing infrastructure, strengthen energy independence, and meet climate targets.
Sizewell C will be only the second new nuclear plant built in the U.K. in more than 20 years. Once operational, it is expected to supply electricity to around 6 million homes and create approximately 10,000 jobs at the peak of construction.
Centrica’s total construction commitment for the plant sits at £1.3 billion. The company expects a 10.8% allowed real return on equity and an internal rate of return exceeding 12%.
The investment is phased, with 40% to be deployed by the end of 2028, and is expected to generate around £750 million in cash yield during construction.
Centrica projects the investment will be earnings accretive from 2026. EBITDA contributions are estimated at £50 million by 2028 and around £150 million at the plant’s commercial operations date.
The company’s share of the regulated asset base (RAB) is expected to reach £3 billion at completion, with gearing of approximately 65%.
“Whilst we had a good idea of the size of Centrica’s stake in Sizewell C, we see the return framework as a positive given attractive headline returns and protections of the RAB based model,” RBC analyst Alexander Wheeler said in a note.
Similarly, Jefferies analysts said the Sizewell C terms for Centrica “look attractive.”
They estimate that, assuming a £3 billion regulated asset base at completion, with a 6% cash yield and a 6.7% weighted average cost of capital, the net present value impact would be between 20 and 25 pence per share—around 10 pence higher than their base case estimate of 14 to 15 pence.
“We don’t expect all of it to be priced in immediately, as there is some uncertainty regarding scenarios,” analysts said.