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Friday, 7 February, 2003, 20:28 GMT
British Energy shares soar on supply deal
British Energy's coal fired power plant at Eggborough
British Energy shares had lost 95% of its value
Shares in struggling energy giant British Energy have soared on news of an electricity supply deal.

The nuclear power group closed up 37% at 6.37 pence after announcing a four year supply deal with Centrica.

Shares had lost 95% of their value in the past 12 months after falling power prices nearly pushed the energy giant over the edge.

This deal is something that will provide stability

Angelos Anastasiou, utilities analyst at Williams de Broe

The deal to supply 5.5 million of Centrica's electricity customers was welcomed by shareholders as it leaves the company less exposed to price fluctuations in wholesale supply.

Centrica sell electricity and gas under the British Gas brand name in the UK.

Stability

The UK's biggest electricity generator has signed a four-year deal with Centrica to deliver 38 tera-watt hours of power.

This adds up to roughly 20% of Centrica's needs over the period, or one tenth of the UK's annual electricity requirements.

Analysts welcomed the agreement with Centrica.

Angelos Anastasiou, utilities analyst at Williams de Broe, said: "This deal is something that will provide stability... Four years gives a reasonable amount of outlook and if it goes well could be extended further."

Plummeting power prices

The proposed bail-out of British Energy has to be accepted by the UK government, creditors and the company itself by February 14.

If this does not happen, the government could withdraw its 650m loan facility, effectively forcing the nuclear power group into administration.

Hit hard by plummeting power prices, British Energy announced a new strategy in November focusing on securing short and medium-term power contracts.

It also announced an agreement with British Nuclear Fuels, by which fuel supply and waste management costs were to be linked to wholesale electricity market prices.

Last week, Centrica's chief operating officer Mike Alexander was made chief executive at British Energy.

His first task will be to finalise the financial restructuring.

See also:

28 Nov 02 | Business
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27 Nov 02 | Business
22 Nov 02 | Business
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