Centrica, the owner of British Gas, confirmed this morning that it had negotiated down the price it will pay EDF for a 20 per cent stake in British Energy.

Instead of paying the French power group £3.05 billion for a 25 per cent stake in British Energy, as agreed last September, Centrica is now paying the equivalent of £2.3 billion for a 20 per cent stake. Centrica will also form an 80/20 joint venture to build four new nuclear power stations in the UK. Shares in Centrica rose by 2.97 per cent to 234.25p.

As reported in The Times this morning, the deal, which will also allow the British company to reduce its exposure to wholesale energy, consists of £1.1 billion in cash and Centrica's 51 per cent stake in Société de Production d'Electricité (SPE), the Belgian power generator, which has been valued at £1.2 billion. The company has now also placed the rest of its European operations under strategic review.

Sam Laidlaw, Centrica’s chief executive, described the EDF deal as a “watershed” moment for the company, adding that while it was difficult to predict energy prices going forward, the deal was good news for customers as it gave the group a buffer against volatile commodity prices. Last week the group’s British Gas arm reduced electricity prices by 10 per cent for 4.5 million customers

Roger Carr, Centrica’s chairman, said: “The deal represents good value for Centrica shareholders, improves the strategic balance of our business and further underpins our green energy credentials.

“The attractive price secured for the sale of SPE will help preserve our balance sheet firepower as we focus the group on growth opportunities in the UK and North America.”

The announcement of the deal came as Centrica said it had performed well in the year to date, due mainly to the combination of cold weather, which increased demand for gas and power in the UK and North America, and falling wholesale commodity prices, caused by consistent supply and weak demand from large industrial users. Overall, it said that full year group earnings continued to be in line with expectations.

EDF said last September that it would pay £12.5 billion for British Energy, with Centrica chipping in a quarter of that sum to take an equivalent stake. Centrica raised £2.2 billion in a rights issue three months later to help to pay for the deal.

However, after a sharp drop in electricity prices hit British Energy's expected revenues, Centrica's shareholders urged the company not to overpay and insisted that it renegotiate the deal's terms.

Its original price was agreed in a non-binding memorandum of understanding shortly before the collapse of Lehman Brothers in September 2008 sent global markets plunging.

EDF, which is under pressure to reduce debt after the British Energy acquisition and its purchase of a stake in the nuclear assets of US energy group Constellation, did not want to renegotiate the terms.

Mr Laidlaw has previously emphasised that he would do a deal only if it was in the interests of all shareholders.

He has also pointed to Centrica's other options as it seeks to secure energy supply for the decades ahead, noting this morning that there were plenty of opportunities around to invest in gas assets and that he was also interested in gas storage.

Centrica recently snapped up a 22 per cent stake in Venture Production, the specialist North Sea gas producer, although it is understood that the company has no plans to launch a full bid. Mr Laidlaw refused to comment on speculation around a possible bid for Venture this morning.

A takeover of Venture would, nonetheless, meet Centrica's stated aim of expanding its upstream production operations as a way of insulating itself from volatility in wholesale prices.

Centrica is keen to have a stake in British Energy - whose eight nuclear plants generate more than one sixth of the UK's electricity - because it currently generates only about 30 per cent of the electricity that it needs to supply its customers. This forces the company to buy power in the wholesale energy market, which has, during the past two years, proved expensive and has pushed British Gas into the red at times.

It is understood that after the British Energy transaction, Centrica will be self-sufficient for more than 45 per cent of British Gas's electricity needs.

Since Centrica has spent only half the rights issue proceeds on the British Energy acquisition, speculation will grow that it will spend the balance on upstream assets, including Venture.

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