Govt eyes plan to keep British Energy listed
Friday November 15, 2:08 pm ET
LONDON, Nov 15 - The British government is planning a restructuring of troubled nuclear power generator British Energy (London:BGY.L - News) that would keep the firm a listed entity, a source close to the situation said on Friday.
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However, it has not ruled out letting the company go into administration, if it concluded that insolvency was a cheaper means of achieving a restructuring that would keep the company operating.
Either way, the source added, the government will continue to finance the company to save it from liquidation.
British Energy, which produces around a fifth of Britain's electricity, went cap in hand to the government in September to save it from bankruptcy.
The government gave it a short-term 410 million pound ($648 million) loan that enabled it to continue trading. The loan was later rolled over and increased to 650 million pounds, but will expire on November 29.
The government is trying to work out a plan that would enable British Energy to continue as a listed company but would not see the taxpayer take all the risk, only for shareholders to then reap all the rewards.
"If the government is taking a lot of pain in keeping this thing solvent, it won't want it (BE) to suddenly become profitable and start paying that out to shareholders," the source said.
While the plan does not envisage shareholders being able to take dividends out of the company for some time, it seeks to leave some value in the stock.
"There still needs to be some liquidity in the shares to keep it listed and that's the broad principal which is being thought about," the source added.
DEBT FOR EQUTIY SWAP
One of the key elements of the governments restructuring plan is that British Energy's outstanding debt should be swapped for equity in the firm.
"Liabilities of the company will have to be reduced... bondholders should take some pain," the source said.
Although British Energy's 400 million pounds of bonds have fallen to around half face value, the source said more pain would be forthcoming.
"The bonds are currently trading at relatively unrealistic levels," the source said.
The source added that the idea of the government taking an equity stake in British Energy directly or indirectly via the company's other main creditor, state-owned nuclear reprocessor BNFL, looked unlikely.
"There would have to be significant (legal) changes for government to be able to take a significant equity stake," the source said.
The source said the government would insist many of the same terms it wants imposed as part of a solvent restructuring plan also be imposed if the company is put into administration.
This would be the price of providing the cash to enable the administrator to keep the business running.
Whichever plan the government decides on would have to receive EU approval and is unlikely to be implemented until the first quarter of 2003 at the earliest.
The source said the government would not simply roll over its loan to British Energy again on November 29. It will express a view on whether it wants the company to remain a listed entity or to go into administration.
"Where government sits in that part of the debate will be made clear, as will some of the parameters of any restructuring," the source said.
British Energy's shares closed up eight percent on Friday at 9.21 pence after it announced talks to sell one of its viable assets -- an 82 percent stake in Canadian nuclear project, Bruce Power. |
