UK utility Centrica has agreed a deal with EDF to buy a stake of British Energy, as agreed on a preliminary basis last year. But the size of the stake has fallen from 25%, as announced in January, to 20% today.

According to this deal, Centrica will pay EDF GBP1.1 billion (EUR1.2 billion), and give EDF its 51% stake in Belgium’s utility SPE. In a statement, Centrica valued the stake in SPE at GBP1.2 billion, or EUR1.3 billion. The business, Belgium’s second-largest power company, says it has a turnover of EUR2.4 billion and 1,000 employees. (In January 2009, Centrica acquired GDF’s interest in SPE for €585 million (including €70 million paid after completion in relation to the Pax Electrica II contract) in order to increase its interest from 25.5 per cent. to 51 per cent.)

Under the agreed structure, EDF will have day-to-day operational control and Centrica has a package of governance rights.

As part of the deal, EDF and Centrica have formed an 80:20 venture for building, operating and decommissioning four EPRs, which was announced in 2008. EDF and Centrica will take power from the BE fleet of eight nuclear power stations and one coal-fired power station at an 80:20 ratio. Also, EDF will supply Centrica with 18TWh of power at market prices for the period 2011-2016. The final investment decision date for the first nuclear new-build project is currently expected to take place in 2011. This project is separate from EDF’s recent support for a total of six sites for new nuclear power stations in the UK.

In a statement, Centrica said that the deal reduces its exposure to volatile gas prices, and estimates that the deal will increase the share of customers’ peak demand that it can satisfy from its own reserves from 58% in 2008 to 85%. It said: “The remainder of the power must be bought in the wholesale market, exposing Centrica to movements in volatile wholesale power prices, which are in turn heavily influenced by wholesale gas prices.” It added that it would not see the benefit of this until 2012, when BE’s current long-term supply contracts expire.

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