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Monday, 23 September, 2002, 14:50 GMT 15:50 UK
British Energy facing crucial week
Dungeness B Power Station
British Energy provides one-fifth of the UK's electricity
struggling nuclear power firm British Energy is facing a crucial deadline this week as it battles for its financial survival.

Earlier this month the company won an emergency loan from the government of 410m ($635m) after it warned that it faced insolvency.

But the loan deal expires on Friday.

Press reports have suggested that the government will extend the financial aid package, and that shareholders and bondholders are considering injecting extra cash into the company.

Energy Minister Brian Wilson told BBC Radio 5 Live that no decision had yet been made and added: "There are no dreams scenarios in this".

Nonetheless, hopes of a deal sent British Energy shares up 7p, or almost 70%, to 16p by mid-afternoon.

Loan talk

British Energy and the government will continue negotiations over the loan this week.

Mr Wilson said "the flow of information is continuing" and that a decision was "imminent".

Speculation about British Energy's fate has shifted in the last week.

Initial reports suggested the company would be put into administration.

But it is now widely expected that the loan will be extended, in part because of the high financial and social costs associated with putting the company into administration.

Mr Wilson said "the suggestion of administration hadn't come from us", but would not rule out the possibility.

Long term solution

As well as the extension to the loan, British Energy is seeking long term help.

The group, which provides a fifth of the UK's power, has been hit by a drop in the wholesale price of electricity and by a shutdown at one of its power stations.

It is lobbying the government for a cut in the 300m a year it pays the state-run British Nuclear Fuels (BNFL) to deal with nuclear waste.

It is also seeking exemption from the climate change levy, a cut in business rates and reform of the electricity trading system known as Neta.

Reports have suggested that a number of bondholders in the company are willing to subscribe to new "fund-raising" bonds providing the government is willing to drop the climate change levy.

Foreign interest?

Reports of stake-building in British Energy has also sparked rumours of a potential foreign bidder.

Fidelity International, the US company's overseas arm, now owns 9.19% of the firm, making it the group's second largest shareholder.

However, the FSA, the financial regulator, is continuing its investigation into the time it took British Energy to disclose its problems.

The FT said on Monday that three weeks before British Energy approached the government for help, the company told analysts that its financial position was healthy.

See also:

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