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Thursday, 26 September, 2002, 12:16 GMT 13:16 UK
British Energy wins reprieve
Hunterston power station in Scotland
The move safeguards some 5,000 jobs - for now
The UK Government has extended and increased British Energy's financial support package, giving the struggling nuclear power firm some extra breathing space.


There can be no certainty about the final shape of any restructuring or whether it will preserve value for investors

British Energy
The company said on Thursday that it had agreed an extension of its emergency loan facility, originally due to expire on Friday, until 29 November.

Under the deal, the loan, originally set at 410m, will rise to 650m - "to provide working capital for the business and collateral," the firm said.

The move means that 5,000 jobs spread across British Energy's eight nuclear power plants are safe for now.

Emergency situation

The government arranged emergency funding for British Energy earlier this month after the company warned that it was facing insolvency.

The loan was intended to keep British Energy going long enough for it to draw up a restructuring plan.

British Energy share price
"The Board... is working closely in conjunction with its advisors to develop proposals on the future structure of the company," British Energy said in a statement.

"However, if further discussions are not successful... the company may have to take appropriate insolvency proceedings.

"At this stage there can be no certainty about the final shape of any restructuring or whether it will preserve value for investors."

Nuclear power

The firm, which was under state ownership until 1996, is the UK's biggest nuclear power provider.

This has made it more difficult for the government to allow British Energy to go into administration.

Putting the company into administration may also prove more expensive than propping it up until a restructuring plan is thrashed out.

British Energy, which supplies about one-fifth of the UK's power, has been hit hard by a steep drop in electricity prices since the wholesale power market was freed up last year.

Shares bounce

Other power providers have been able to offset the weaker wholesale market by maintaining high retail prices, but this strategy is not available to British Energy, which does not have a retail arm.

British Energy shares, which have lost about 90% of their value since the beginning of the year, were up slightly at 23.5p in mid-morning trade in London.

Investors had anticipated a deal, sending British Energy's stock up by one-third on Wednesday in response to speculation that British Nuclear Fuels was poised to take a stake in the firm.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Marcia Hughes
"Keepin British Energy afloat is crucial"
See also:

23 Sep 02 | Business
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17 Sep 02 | Business
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09 Sep 02 | Business
07 Sep 02 | Moneybox
06 Sep 02 | Business
27 Aug 02 | Business
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