Japan's Hitachi will take a $2.8 billion hit to profit after it decided on Thursday to freeze its flagship nuclear power project in the U.K.
The Japanese company's board decided to suspend a plan to build two nuclear reactors on the Isle of Anglesey in Wales after failing to reach an agreement with the British government over funding for the 3 trillion yen ($27.5 billion) project. Hitachi was seeking significant financial support from London, having been unable to secure private investments in the project.
The freeze will add to uncertainty about the outlook for the broader nuclear power industry, which is still reeling from the aftermath of the Fukushima Daiichi nuclear disaster in 2011.
It has also thrown Britain's energy plans into doubt by creating a potential shortfall in future power supplies as old reactors and coal plants will be phased out in the coming decades.
The change disclosed by Hitachi on Thursday means that the company's forecast for net profit this business year will plunge to 100 billion yen from an earlier estimate of 400 billion yen.
Hitachi has been spending hundreds of millions of dollars a year to prepare the site for the project and obtain a license for its boiling water reactor. "We cannot make any further investment," Hitachi President and CEO Toshiaki Higashihara said in a press conference to announce the decision.
Hitachi is not entirely abandoning the nuclear project. "If the British government comes forward with another proposal, we may unfreeze it," said Higashihara. But with May's government occupied with the Brexit crisis, a decision that would change the situation is unlikely.
If Hitachi unilaterally scraps the project "it could be liable to pay a substantial breach of contract penalty to the British government," said a source familiar with the negotiations.
Hitachi had taken on the planned construction of two reactors after acquiring U.K.-based Horizon Nuclear Power in 2012.
Hitachi, for now, intends to focus on the domestic business. "Over the next few years, we will focus on carrying out nuclear power projects in Japan," Hitashihara said. "We will see if different proposals will emerge in the UK in the meantime."