British Energy, the UK's biggest nuclear generator, has been allowed by the government to restructure its debt in order to stave off bankruptcy. The company, which has debts estimated at £1.26 billion, would continue to pay into a specially set up fund, but would benefit from a government undertaking to underwrite the cost of decommissioning its nuclear power stations, around £2.1 billion, which the fund is there to support; it has also been granted an extension until March 2003 of the emergency loan of £650 million advanced in September. The plan will probably cost the British taxpayer £200 million a year for the next decade.
In return, the company must speed up the sale of its profitable North American operations, principally Bruce Power nuclear plant in which BE owns an 82 per cent stake, and adopt a new business strategy that reduces significantly its exposure to the variability of wholesale energy prices. Cameco Corporation, the other major stakeholder in Bruce Power, has first refusal on any sale and has expressed an interest in buying all or part of BE's stake. Bruce is saying that a decision on new ownership is expected before the end of the year.
British Energy considers the plan its best hope for long term financial stability. Under the plan, creditors would convert their debt into newly issued shares, a step that would lead to a very significant dilution in existing shareholdings, the company admits. Success of the plan depends on the co-operation of major creditors, who would have to accept a freeze on payments and a significant write down in the £1.26 billion of debt.
Trade secretary Patricia Hewitt blamed the company's problems on 'serious management failings'. She said the government has prepared contingency plans against the event that British Energy, which supplies around 25 per cent of the UK's power, becomes insolvent and is unable to continue to trade.
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