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Friday, 6 September, 2002, 12:21 GMT 13:21 UK
British Energy pleads for state bailout
British Energy, the UK's biggest electricity generator, is locked in talks with the government aimed at staving off the collapse of its business.

On Thursday night, the company - which runs eight nuclear power stations in the UK - warned that it faced insolvency unless immediate financial help was found.


There's no question at all of taxpayers writing a blank cheque

Patricia Hewitt
Trade & Industry Secretary
It is thought that the talks will continue over the next few days and, in a statement, the company said it had reasonable grounds for believing the discussions would be successful.

But it warned shareholders: "There can be no certainty that this will preserve value for investors."

The company said that if the talks failed, British Energy might be unable to meet its financial obligations and could face insolvency.

"We had no alternative other than to seek government support," said executive chairman Robin Jeffrey.

'No alternative'

The Trade and Industry Secretary Patricia Hewitt told BBC News: "There's no question at all of taxpayers writing a blank cheque to British Energy and its shareholders."

She said the only reason she was getting involved in discussions with British Energy was because the government had a responsibility to ensure the safety of nuclear power.

The government's stance has been criticised by British Energy shareholders.

Electricity price graph
Wholesale electricity prices have dropped sharply

"It is not the power company that is to blame here. It's obviously the government," said one shareholder, Malcolm Stacey, in an interview with BBC Radio 4's Today programme.

"They changed the rules in March last year," he said.

"That resulted in a 20% drop in power prices. You don't have to be Socrates, you don't have to be Plato, to realise that that is going to spell trouble."

Industry problem

British Energy has recently experienced financial problems because of falling wholesale electricity prices.

It made a loss of 518m in its latest financial year and it is heavily in debt.

David Porter of the Association of Electricity Producers said British Energy was not the only company in difficulty.

"We have an extremely competitive wholesale electricity market and this is a market that now leaves us with blood on the carpet," Mr Porter told BBC Radio 4's Today programme.

"British Energy has responded to this quite magnificently by cutting its costs over the last few years," he said.

"But it's reached a point, as have many generators, where the prices it receives are below the cost of production.

"This is not the only generating company which is in difficulty, there are quite a few, and one has already gone into receivership."

Exemption plea

The company has been lobbying for exemptions from the climate change levy or business rates to try to cut its costs.

The move was backed on Thursday by the shadow trade and industry secretary Tim Yeo.

"Immediate relief for British Energy could come in the form of exemption from the climate change levy, particularly because the nuclear industry produces no CO2 emissions," he said.

Trading in British Energy's shares was temporarily suspended shortly before it announced that it was seeking financial help from the government.

The shares are currently worth 80.75 pence. Three years ago they were trading at more than 700p.

British Energy was privatised in 1996 and employs about 8,200 people.

In addition to operating eight nuclear power stations in the UK, the company has a joint venture in the US - Amergen - with energy group Exelon.

British Energy is seeking a buyer for its share of Amergen, and analysts say this could raise between 200m-300m.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Rory Cellan-Jones
"Putting in tax payers money will be controversial"
Association of Electricity Producers David Porter
"It has reached a point where the prices it receives are below the cost of its production"
British Energy shareholder Malcolm Stacey
"Shareholders... are very, very irritated... with the government"
See also:

05 Sep 02 | Business
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25 Aug 02 | Business
15 Jul 02 | Business
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