Troubled nuclear group wins loan extension

Troubled nuclear group British Energy was today handed a one-year extension to a £650m (€946m) emergency loan agreement with the British government in a bid to tackle its financial problems.

The company, which was on the brink of insolvency before the government stepped in last September, said the facility will now be extended to September 2004 to enable it to see out a restructuring programme announced almost four months ago.

But it warned that if the those requirements were not met it may have to admit defeat and seek insolvency proceedings, which would see the government recover only “a small fraction” of the loan amount.

Shareholders, who are owed more than £1bn (€1.45bn), would face an uphill struggle to get anything back on their investment, with British Energy describing their chances as “highly unlikely”.

The group said: “The board continues to believe that the proposed restructuring is in the best interests of the company and is working closely in conjunction with its advisers and creditors to implement a successful restructuring of British Energy.

“However, if the requirements set out in the restructuring proposals are not met and the restructuring is therefore not implemented, the company may have to seek insolvency proceedings.”

The government, however, is entitled to require immediate repayment of the loan if British Energy’s major financial creditors refuse to accept the terms of the current agreement by March 25, or if Trade Secretary Patricia Hewitt decides that the restructuring process is lagging behind.

British Energy’s problems emerged when the loss-making group warned the Government that it could face insolvency if it did not receive immediate financial assistance.

Since then it has clinched the sale of its Canadian subsidiary for 770 million Canadian dollars (€476m) to stave off insolvency.

The company, which provides up to a fifth of Britain’s power, was hit by the cash squeeze because of plunging power prices and technical problems at its power stations.

The crisis prompted concerns that lights could go out in some parts of the country and workers could lose their jobs, with more than 5,200 people employed by the group in Britain.

The company has nuclear plants at Torness and Hunterston in Scotland, Dungeness in Kent, Heysham near Blackpool, Hartlepool, Sizewell in Suffolk and Hinkley Point in Somerset.

Shares in the group remain suspended.