23 September 2002 – The UK government is expected to extend for a further two months the £410m ($638m) loan given to ailing nuclear power generator British Energy.
Officials from the company are finalizing arrangements for the facility this week and an announcement is expected to be made by the end of the week. Whitehall insiders insisted that no final decision had been taken about British Energy (BE) but that ministers have been influenced by the offers by bondholders to provide additional finance and the interest of foreign investors in the underlying assets.
US mutual fund investor Fidelity last week increased its stake in BE to just under ten and saw its investment almost double as the share price recovered from a low of 5p to stand at 9p on Friday.
Other potential investors include Warren Buffet’s Berkshire Hathaway which already owns Northern Electric and Yorkshire, two electricity distribution companies. Analysts point to the absence of any retail arm as a contributing factor to BE’s poor performance and reliance on wholesale power prices. Florida Light and Power are also thought to be considering an approach.
UK energy minister Brian Wilson appeared to be favouring a when he commented, ” The question remains, whether there is any logic in allowing the nuclear industry to fade away in the UK at exactly the time when ewe are trying to increase our non-carbon sources of electricity generation. I don’t think it makes any sense”.
If the government loan is extended a longer term solution will need to be found to keep BE afloat with exception for nuclear production from the Climate Change Levy and local rate relief two of the possible mechanisms.
Meanwhile the Financial Services Authority is stepping up its enquires into the information released to the market ahead of BE’s warning of insolvency. Just three weeks prior the company told analysts that its finances were sound and ignored for two days subsequent advise to inform the market of its problems.