British Energy shareholders warned
15 January 2003 - Shareholders at an EGM called by British Energy were told that the company may not be able to meet the government's strict timetable for agreeing a rescue deal with bondholders.
New chairman, Adrian Montague, addressed 80 shareholders at the meeting in Edinburgh yesterday, which was called as a result of the fall asset value below half the value of called-up share capital at the nuclear generator. Mr Montague said that the 14 February deadline to complete negotiations with bondholders and creditors would be very tough although he declined to comment on whether he believed that the terms on offer would be acceptable to both parties.
Unless British Energy is able to resolve its financial problems the government may well take it back into public ownership. Energy minister Brian Wilson has introduced a draft law to Parliament, ensuring that the power stations owned by British Energy would continued operating safely in the event of the company's insolvency.
The company was hit hard by the drop in wholesale power prices that followed the introduction of the New Electricity Trading Arrangement (Neta) in April 2001. Unlike other British utilities, the company, which lacks a substantial end-customer base, was unable to recoup the losses it made in power generation through retail operations.
As a result, last September British Energy found itself on the brink of insolvency and had to be rescued by an emergency £650m ($1m) government loan. However, the company's competitors cried foul, and the European Commission has since decreed that the loan be repaid no later than 9 March this year. In the meantime, British Energy has been trying to negotiate its nuclear fuel-reprocessing contract with state-owned BNFL, while raising cash through a programme of asset disposals.
Analysts Datamonitor believe the company's debt burden is such that those measures on there own cannot prevent a collapse.
Datamonitor commented, "The government is keen to avoid a nightmare scenario where the company is allowed to fall into costly administration, as it previously happened with Railtrack. If all else fails, at least a nationalized British Energy will be able to maintain nuclear safety and continuity of supply. However, the company's current stakeholders would see nothing at all for their pain, and would therefore be well advised to take the offer that is currently on the table."
At the EGM, Montague said, "My assessment is that, regrettably, there is no chance that the government will offer shareholders the kind of bail-out that was involved in Railtrack." |
