What the Sizewell C plan really means: more power and solid returns for its private investors

Welcome to "a new golden age" for nuclear power, said Ed Miliband, the energy secretary, as he signed off the £38bn (if we're lucky) Sizewell C mega-plant in Suffolk.

- Nils Pratley

It will certainly look golden from the point of view of Centrica. The owner of British Gas is investing £1.3bn for a 15% equity stake in Sizewell on terms that look attractive for it.

Centrica's explanation of the mechanics behind Sizewell's financing is more helpful than the government's because it demonstrates how far ministers have had to go to attract private investors for a project once advertised to cost £20bn.

In short, Centrica reckons it will make an internal rate of return above 12% if Sizewell arrives at £40bn (all the numbers being in 2024 prices). But the revealing part was what happens if costs overrun and the construction bill ends up at £47.7bn. In that case, the company's rate of return will still come in above 10%. That is in nominal terms, so one has to knock off inflation, but it's still a decent number. And - critically - it is as low as it could go. After £47.7bn, taxpayers or billpayers are on the hook for the rest.