Nuclear power plans damaged as the Germans pull out

RWE and E.ON blame impact of Fukushima and lack of finance as they walk away from two new plants

Britain's nuclear plans were dealt a massive blow yesterday when two German power giants shelved their £15bn aim to build two nuclear power plants that would have powered six million homes.

RWE and E.ON launched the joint venture Horizon in 2009, planning to build six gigawatts of new nuclear power capacity in Britain by 2025 and have a first nuclear reactor running by 2020.

The two plants were expected to provide about 1,600 permanent jobs and the German firms had already bought two sites short-listed by the Government for building new nuclear plants, at Wylfa on Anglesey in Wales and Oldbury-on-Severn in Gloucestershire.

But RWE said it had become too difficult to raise the finance. RWE said: "The global economic crisis has meant that capital for major projects is at a premium and nuclear power projects are particularly large scale, with very long lead times and payback periods." They said they had also been hit by Germany's decision to axe nuclear power following Japan's Fukushima disaster last year. Together RWE and E.ON run 23 nuclear reactors in Germany and they face the expense of closing them down.

RWE added: "Both parties will endeavour to ensure that Horizon's assets and work on development can be taken up quickly by other potential investors" and Tony Cocker, the chief executive of E.ON UK, added: "E.ON has decided to focus its investment in the UK on other strategic projects that will allow us to deliver earlier benefit for customers and our company, rather than the very long-term and large investment new nuclear power calls for."

The Energy minister Charles Hendry said E.ON and RWE's withdrawal was "clearly very disappointing" but claimed it did not affect Britain's overall nuclear energy plans. "The partners have clearly explained that this decision was based on pressures elsewhere in their businesses and not any doubts about the role of nuclear in the UK's energy future," he said. "The UK's new nuclear programme is far more than one consortia and there remains considerable interest."

EDF and Centrica are working on plans for the UK's first new nuclear plant at Hinkley Point but the owner of British Gas has said it wants more details about how the Government's electricity market reforms will affect the programme before pressing ahead.

While the nuclear industry was expecting an announcement from Horizon yesterday, it was thought to be about who RWE and E.ON had chosen to build the reactor – Westinghouse, owned by Toshiba, or France's Areva.

Greenpeace's policy director Doug Parr claimed: "The Government's energy strategy is crumbling. Not even the billions of pounds of taxpayers' money they have offered as incentives to the German and French nuclear industry are enough to make a new generation of power stations economically viable."

And unions warned thousands of skilled jobs were at risk. Unite's national officer Kevin Coyne said: "Britain needs Project Horizon to succeed for the sake of our future energy needs and thousands of skilled jobs which would be created as a result. The Government must urgently do everything possible to get Project Horizon back on track by finding a buyer to take over the project."