The UK’s biggest electricity producer, British Energy, reported a loss of £4.29 billion for the year ending March 2003, mostly owing to writing down by £3,74 billion the value of its UK power stations. Total write-downs amounted to £4.16 billion, adding to a pretax loss otherwise of £130 million.

Nonetheless the scale of these losses reflects the scale of BE’s financial problems, caused by a combination of low electricity wholesale prices, high nuclear fuel costs and unforeseen reactor shutdowns. The write-downs put a new valuation on the company’s nine nuclear power plants of only around £800 million. And although revenue from its North American activities rose by £144 million, BE has no choice, under the terms of its rescue package with the British government, than to sell off all its N American assets. Bruce Power, Canada, has already been sold, and trade secretary Patricia Hewitt has agreed to extend the June 30 deadline for the sale of the group’s remaining US interests.

Many hurdles remain. Production costs at 21.70 £/MWh are still well above the UK price of 18.3 £/MWh, and prices are expected to fall further, perhaps by as much as 7 per cent. Lenders have to agree to a debt-for-new-BE shares deal amounting to £1,3 billion, a device that could result in shareholders owning less than 5 per cent of the company. And the EU has still to approve the government aid package worth £2.26 bn to help with decommissioning costs.

BE is not having an easy time disposing of Amergen, its 50/50 joint venture with Exelon, although the company says that discussions with potential buyers are “ongoing”. The joint venture owns three US power stations, including Three Mile Island.

l The company could wind up with a bill for £150 million in legal and advisory fees by the time restructuring is complete. That is nearly six times the company’s current stock valuation of £27 million. Nearly £35 million has already been spent, during the first seven months of a restructuring process that is likely to continue for another 18 months.