By Taro Fuse and Makiko Yamazaki
TOKYO (Reuters) - Toshiba Corp <6502.T> is considering liquidating its British nuclear unit NuGen, two people with direct knowledge of the matter said on Thursday, leaving Britain to seek alternatives for a project that was meant to provide 7 percent of the country's electricity.
The move comes as Toshiba believes talks to sell the unit have dragged on too long, the sources told Reuters.
"Toshiba is eager to shut off potential risks associated with NuGen soon," one of them said. Both sources declined to be identified as the talks are private.
Britain needs to invest in new capacity to replace aging coal and nuclear reactors that are due to close in the 2020s, but large new plants, especially nuclear have struggled to get off the ground due to high costs and weak electricity prices.
The NuGen project in Moorside, northwest England, faced setbacks after Toshiba's nuclear arm Westinghouse went bankrupt last year.
Korea Electric Power Corp (KEPCO) <015760.KS> was initially the preferred bidder, but lost that status in July.
Toshiba then negotiated with Canada's Brookfield Asset Management Inc
The Japanese conglomerate is still in discussions with KEPCO, but as prospects for the talks are unclear Toshiba has decided to consider liquidating NuGen, one of the sources said.
When contacted by Reuters, Toshiba said in a statement it "continues to consider additional options including sale of its shares in NuGen to KEPCO."
"We are carefully monitoring the situation, in consultation with stakeholders including the UK government," it added.
A KEPCO spokesman said the company is not aware of Toshiba's plan to liquidate NuGen.
Toshiba has already written down the value of NuGen's assets, but has been constantly injecting cash in order to keep the project running.
Operations at the project have already been scaled down, and the headcount at the project was slashed last month to fewer than 40 people.
A spokesman for NuGen said: "There is a limited window of time, and the wind-up of NuGen, and the Moorside Project remains a very real prospect with Toshiba indicating clearly its intention to withdraw from the project by the end of the financial year."
"Everything is being done by the teams at NuGen and Toshiba to minimise that prospect, to enable Toshiba to achieve a clean exit, and to enable NuGen and the Moorside Project to continue,” the spokesman said.
(Reporting by Taro Fuse and Makiko Yamazaki, Additional reporting by Susanna Twidale in LONDON and Jane Chung in SEOUL; Editing by Simon Cameron-Moore)