16 July 2002 – British Energy, Scottish Power and Scottish and Southern Energy yesterday agreed revised terms to the Nuclear Energy Agreement (NEA). The revised terms are subject to regulatory approval but legal proceedings have been suspended.

The NEA provides for the sale of all British Energy output to Scottish Power 74.9 per cent, and Scottish and Southern Energy 25.1 per cent, until 31 March 2005.

In its accounts for the 12 months ended 31st March 2002, BE recognised £80m ($125.6m) in its assets, which reflected its assessment of the future revenues above market price that it would receive under a revised NEA. This amount has already been realised in cash and will be retained in full by British Energy, which recognised one third as revenue in the 2002 financial year and will recognise the remainder this year.

The full settlement is the equivalent, for Scottish Power and Scottish and Southern Energy, of a premium of around £1.65/MWh on purchases for the period between NETA go-live and expected BETTA go-live. Under the revised terms, Scottish Power and Scottish and Southern Energy will now purchase electricity from BE under arrangements much more closely linked to market prices and terms for base load energy in England and Wales.

British Energy ‘s price expectations for the current financial year, set out at the time of its preliminary results in May 2002, remain unchanged. British Energy continues to anticipate a UK achieved price representing a £1/MWh premium across its UK portfolio.

The amended NEA will continue in operation until the introduction of the British Electricity Transmission and Trading Arrangements (BETTA) or, if earlier, 1 April 2006. Beyond that date, Scottish Power and Scottish and Southern Energy have an option for follow-on contracts up to 2011 at reduced volumes.

All three companies welcome the agreement, in that it removes uncertainty and provides continuity and stability to the customer and supplier relationship over the longer term. In its statement, British Energy said, “The settlement is satisfactory to all sides and the companies believe it represents a fair and reasonable basis on which to resolve the dispute between them.”