British Energy wins reprieve
Thursday, November 28, 2002
Troubled British Energy PLC — which owns Ontario's Bruce Power LP — has won a reprieve from the British government, which said Thursday the power company's continued survival depends in part on the sale of its North American operations.
Under an agreement announced Thursday, the British government agreed to extend emergency state aid to the firm in exchange for a far-reaching restructuring that would see it issue new bonds and shares in exchange for existing bonds.
BE's chairman Robin Jeffrey is also leaving his post under the reorganization.
In a statement, the British government said it has agreed — subject to conditions — to give its support to BE's plan.
The agreement calls for BE to:
• continue to make payments to a fund to be used to pay for costs of decommisioning power stations.
• give that fund £275-million of bonds in the company.
• surrender to the fund 65 per cent of available cash each year.
"The government will underwrite these arrangements to ensure safety and environmental protection," the British government said in a statement.
British Energy had survived since September on £650-million ($1.58-billion) in emergency financing provided by the British government. However, the financing was to expire tommorrow and the company has used up 60 per cent of the money.
As a condition of Thursday's extension, the government said an agreement in principle with BE's major creditors must be reached by the middle of February.
"The government is prepared to continue to fund BE's operations while the restructuring plan is agreed with creditors," the government said. "The existing credit facility will be extended to March 9, 2003, but the existing ceiling of £650-million will not be increased."
However, in order for BE's plan to succeed, the British government also noted that it has to secure an agreement by its existing major creditors to a temporary freeze on payments and subsequently a significant write down in the value of what they are owned.
As well, BE must successfully complete the sale of its North American operations.
"The government has set out today the limits of what it is willing to do to support solvent restructuring," the British government said. "It is now up to the company and its financial stakeholders to determine the future of British Energy."
"If BE's plan is not delivered, then its directors may decide that administration is the only option."
If that happens, the government said it has planned for that alternative with a continency plan to ensure nuclear safety and secure energy supply.
"Whatever happens the Government will continue to support the operations of BE's nuclear power stations which will continue to generate electricity," the government said.
Bruce Power is 82-per-cent owned by British Energy and Thursday's discussion was seen as having an impact on talks to sell it in the days leading up to the announcement.
Cameco Corp. of Saskatchewan, which owns 15 per cent of Bruce Power, is believed to be part of a consortium of buyers that also includes TransCanada PipeLines Ltd. of Calgary and Borealis Capital Corp., a merchant bank funded by the Ontario Municipal Employees Retirement Board. |
