British Energy wins new lease on life

17 February 2003 – The UK government extended its lifeline to British Energy (BE) after creditors finally accepted the company’s restructuring plan late Friday, saving the company from insolvency. Following intensive negotiations over recent days, British Energy’s Creditors agreed on the amounts they would receive, and the necessary standstill agreements were agreed in principle.

The standstill deal, which gives bondholders more than 70 per cent of their investment compared with an initially foreseen 30 per cent, saves BE from administration and keeps it in the private sector. It will enable ministers to prolong the emergency loan granted in September last year beyond the March 9 deadline – but at a reduced rate.

BE is expected to repay the bulk of the £423m ($676m) it has so far drawn down from the £650m loan facility through the proceeds of its sale of its Canadian business, Bruce Power, completed Friday, and other credits from bondholders. The company said in a brief statement that it had completed the sale of its 82.4 per cent stake in Bruce Power for an initial consideration of £250m. British Energy also received £51m in recognition of a capital contribution it paid Bruce Power in December when the sale was initially agreed.

But the company that supplies a fifth of the country’s energy needs said it would still require state aid for limited working capital and collateral purposes after March 9 – the deadline for the government to submit the rescue plan for EU approval.

Adrian Montague, BE’s chairman, said the deal with creditors, including bondholders, “is a significant milestone in the restructuring but is just one step along a road which may take another 18 months”.

The government welcomed the progress made by British Energy in implementing its restructuring, but said further “hard work” was needed to complete it and that being put into administration was still a possibility. Pointing to contingency plans to fund BE’s administration, the DTI said the government could withdraw the loan if the firm failed to make progress in implementing the plan.