British Energy losses soar

British Energy runs eight power plants in the UK

Ailing nuclear power generator British Energy has unveiled huge losses for the first half of its financial year, underlining the full extent of its financial crisis.

The company said it had lost £337m ($518m) before taxes in the six months to September, a twenty fold increase on the £15m it lost during the same period last year, while sales fell 6.5% on the year to £868m.

It said the loss reflected financial charges and restructuring costs amounting to £213m, as well as a drop in output and lower electricity prices.

The firm, the UK's biggest nuclear power generator, has been surviving on emergency government loans since warning that it faced insolvency in September.

Hard times

British Energy, which produces about a fifth of the country's electricity, has been hit hard by a 40% decline in electricity prices since the wholesale power market was liberalised last year.

While other power suppliers have been able to offset the weak wholesale market by maintaining high retail prices, British Energy has been unable to follow suit because it does not have a retail arm.

British Energy chairman Adrian Montague, who succeeded Robin Jeffrey last month, said he had taken up his position at a "bleak" point in the firm's fortunes.

High costs, low prices, and unplanned stoppages at some of its plants had inflicted "terrible damage" on the company, Mr Montague said in a statement.

Restructuring struggle

British Energy is pinning its hopes for long-term survival on a restructuring plan that would heavily dilute the value of its shareholders' stake in the firm, and could also force creditors to write off part of what they are owed.

The firm urged creditors and shareholders to back the deal, saying it represented the best hope of limiting their losses.

The company said it may collapse if agreement on the overhaul package is not reached, "in which case the distributions to creditors may represent only a small fraction of their unsecured liabilities, and there is unlikely to be any return to shareholders."

As part of the overhaul strategy, the government would underwrite British Energy's hefty nuclear waste processing costs.

The company is also attempting to raise cash by selling off its US and Canadian subsidiaries AmerGen and Bruce Power.

In the City, British Energy shares closed at 6.95 pence, down from 7.85p the day before and from a peak of about 750p in January 1999.