British nuclear power generator announce losses

Troubled nuclear power generator British Energy announced losses of £4.3bn (€5.98bn) today after slashing the value of its power plants and warned it could yet fall into insolvency.

The company was forced to cut the book value of its eight UK nuclear plants by £3.6bn (€5bn) to around £800m (€1.1bn) and the Eggborough coal-fired station by £151m (€210m).

British Energy, which produces around a fifth of the UK’s electricity needs, blamed the high fixed costs of nuclear generation along with a steep decline in wholesale electricity prices.

The East Kilbride-based group was kept afloat last year by a £650m (€904m) British government loan, which it has since repaid, after being pushed to the brink of bankruptcy.

Shareholders and bondholders have still to agree a life-saving rescue plan, with creditors asked to swap £1.3bn (€1.8bn) of debt for new British Energy shares and bonds.

Chairman Adrian Montague said: “Significant progress has been made in the pursuit of the plan, although much work still remains to be done to secure a successful restructuring.”

In a statement, the company warned that if it was unable to implement the restructuring, it may be unable to meet its financial obligations and may have to take appropriate insolvency proceedings.

The British government has extended its financial support to British Energy to September 2004 with a £200m (€278m) loan to keep the company going until it can negotiate a longer-term rescue.

The deal requires clearance from the European Commission which is examining the government’s aid on competition grounds.

Mike Alexander, the chief executive who joined British Energy on March 1 from British Gas-to-AA firm Centrica, said he remained confident that the group’s restructuring could be completed successfully.

The restructuring will leave the company largely in the hands of its creditors, with existing shareholders left with less than 5% of the business.

In the meantime, British Energy is looking to make further cost savings of £25m (€35m) a year in 2003/04 and 2004/05 and has not ruled out further job cuts.

But Mr Alexander said there would be no wholesale redundancies adding “staffing numbers won’t change very much at all”.

Besides the power plant write-downs, British Energy took one-off charges for restructuring costs, the sale of its Bruce Power business in Canada and decommissioning funds for nuclear plants.

In total, exceptional costs this year were £4.2bn (€5.8bn).

This year’s losses compare with losses of £493m (€686m) in 2002. Excluding the write-downs, the firm lost £130m (€143m) this time, compared with a profit of £42m (€58m) a year ago.

The company also confirmed it was suspending the dividend payout for shareholders and warned that trading conditions in the UK would remain challenging.

Shares slipped 16% to 4.05p on the news, a fall of 0.75p.