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BE capital passed from government to Nuclear Liabilities Fund

Thursday, 31 May 2007

The UK's Department of Trade and Industry has decided to dispose of a large part of its stake in British Energy, selling shares amounting to over GBP2 billion ($4 billion). The net proceeds will be put into the Nuclear Liabilities Fund to pay for the eventual dismantling of BE's nuclear power stations.

The UK's Department of Trade and Industry (DTI) has decided to dispose of a large part of its stake in British Energy (BE), selling shares amounting to over GBP 2 billion ($4 billion). The net proceeds will be put into the Nuclear Liabilities Fund (NLF) to pay for the eventual dismantling of BE's nuclear power stations.

British Energy is a private company which owns and operates eight nuclear power stations built under the arrangements of former national programs. Between them, BE's nuclear power plants generate about 68 TWh of electricity per year - about 20% of the country's electricity.

The company was privatised in 1996 but found financial trouble as wholesale electricity prices fell. This combined with maintenance problems that reduced generation led the company to seek aid from the DTI in September 2002. The department took the view that allowing BE to fail would jeopardise the UK electricity supply and mean uncertainty over BE's regular payments into funds for nuclear clean-up.

The DTI's restructuring plan was subject to European Commission approval under state aid rules. This approval was received in September 2004 and restructuring was finalised in January 2005.

As part of the plan, the DTI took on about 1 billion shares in BE, some 64% of the company. On 30 May, with BE having recently posted good results, Trade and Industry minister Alistair Darling announced the DTI would reduce that to 39%. With BE shares trading at GBP5.69 on 29 May, a value of around GBP2.276 billion ($4.5 billion) would be realised.

It had been noted by the National Audit Office that the NLF was "particularly exposed to BE's future financial and operational performance." and that "This uncertainty placed a significant risk in the hands of the taxpayer." The government's decision to place the net proceeds from the share sale into the NLF therefore reduces this risk, while providing a large part of the GBP5.1 billion ($10.1 billion) calculated to be required to eventually dismantle BE's nuclear power stations.

Further information

British Energy

WNA's Nuclear Power in the United Kingdom information paper