August 28 2002 – The UK’s largest electricity generator British Energy said on Tuesday it may agree to run ageing, loss-making Magnox reactors owned by British Nuclear Fuels in a move to ease its funding problems.

A deal would conclude talks begun over four months ago on the future management of some of Britain’s oldest nuclear power plants and give British Energy financial breathing space after it was hit by a steep fall in power prices.

British Energy continues to be in discussions with BNFL on a wide range of issues, including fuel service arrangements, new nuclear build, the possible operation of Magnox plant and transportation, the company said in a prepared statement set to be issued to the London Stock Exchange.

A British Energy spokesman declined to comment on the timing of a possible deal with BNFL. There was press speculation it might come this week.

Officials for BNFL were not immediately available for comment.

A contract with BNFL would give British Energy valuable revenues at a time when the company faces a financial crunch which has prompted speculation of possible re-nationalisation after it went private six years ago.

British Energy has struggled to react to a fall in electricity prices after the introduction of new wholeseale trading agreements (Neta) in 2001.

Critics of Neta say the scheme means producers like British Energy can no longer sell power profitably.

On Sunday, British energy minister Brian Wilson hinted the government could introduce changes to the wholesale electricity trading market to help shore up the nuclear power producer and help it get a higher price for its product.

Unlike other British power utilities, British Energy has no retail business to offset the effect of lower wholesale prices on its generating plants’ profitability.

Shares in British Energy closed at 59p on Friday, having lost nearly half their value in the past month after shutdowns in two of its nuclear power plants.

The stock has fallen from a year high of 336p reached last September due to the company’s exposure to weak prices.