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To: Taki who wrote (112520)	2/7/2003 11:59:22 AM
From: Taki	Read Replies (1) \| Respond to of 150070

BGY going on the news. - British Energy woes ease with Centrica deal Friday February 7, 10:28 am ET By Stuart Penson (Adds share prices, implications for Centrica) LONDON, Feb 7 (Reuters) - Nuclear generator British Energy Plc (London:BGY.L - News) eased its financial troubles on Friday by signing a four-year power sales contract with UK utility Centrica Plc (London:CNA.L - News), the former employer of its new chief executive. ADVERTISEMENT The deal comes as British Energy, the country's biggest electricity generator, survives on state aid while it goes through a controversial restructuring after slumping wholesale power prices pushed it to the edge of bankruptcy in September. The crisis-hit company's shares leapt almost 18 percent to 6.15 pence, compared to a 0.8-percent gain by the UK benchmark FTSE 100 Index (London:^FTSE - News). Analysts said the deal was a sign of progress at the company, whose creditors have yet to agree on a rescue package. "British Energy needs to do deals like this now to show progress in their contracting strategy as they go through the restructuring plan," said Mark Robinson, utilities analyst at Commerzbank. Shares in Centrica also gained, climbing nearly 4.00 percent to 161 pence. Analysts said the deal would help Centrica, which has little generation capacity of its own and needs extra power to supply its electricity customers, to hedge against future power price rises. Centrica, once part of privatised former monopoly British Gas, said the deal would meet around 20 percent of its annual electricity needs over the period covered by the arrangement. "Its part of the company's stategy of hedging its upstream risk," said Jason Goddard, a utilities analyst at CSFB. "They have opportunistically negotiated what looks to be a very decent four-year contract." British Energy said that over half of the 38 terawatt hours covered by the deal would be sold at a fixed price, with the remainder linked to future electricity market prices. A spokesman declined to give the fixed price but industry sources said it was below forward prices for the next four years which are hovering near record lows after the launch of a more competitive trading market last year. The deal covers 10 to 15 percent of British Energy's output and about three percent of UK electricity demand. Analysts estimate that electricity prices over the next four years will average 17.30 pounds per megawatt hour, above British Energy's cost of production which is about 16 pounds, making it one of the UK's least efficient generators. MORE DEALS ON THE WAY British Energy is negotiating similar deals with other utilities, including Innogy (XETRA:RWEG.DE - News), said one source in the nuclear industry. He said Powergen (XETRA:EONG.DE - News) had recently pulled out of a potential deal with British Energy. "If the right deal came up at the right price, we would look at it," said a Powergen spokesman. Innogy was not immediately available for comment. The contract with Centrica was first proposed last summer, but British Energy's management backed away at the last minute, saying the prices were not attractive enough, the source said. The announcement comes days after British Energy said former Centrica chief operating officer Mike Alexander would join the firm as chief executive from March 1. The firm said in November it was reshaping costly fuel reprocessing contracts with state nuclear fuels firm BNFL, tying the price it pays the reprocessing company to the price of power in order to win relief in hard times. Centrica, Britain's largest gas supplier, has expanded its business to include electricity distribution, telecommunications, motoring services and even a credit card.