3 June 2003 – UK nuclear power generator British Energy reported a loss over £4bn ($6.5bn) and said it expects its future to remain uncertain at least until the end of this year. Britain’s largest power producer was rescued from insolvency by the government last year and has now been forced to write off £4.292bn from the value of its power plant assets.
British Energy’s rescue is dependant on the agreement of its shareholders and bondholders to a restructuring, which would leave them with a fraction of the company plus the sale of US assets. The firm repeated its warning that there was much uncertainty and that the deal could yet fall apart.
“The past year has been traumatic for British Energy and its shareholders,” said Chairman Adrian Montague who took over from Robin Jeffrey this year, adding that the company is not yet out of the woods given a “bleak future” for depressed UK electricity prices.
Even excluding the asset downgrades of £3.738bn and further balance sheet write-offs British Energy reported a loss of £130m, compared to a narrow profit of £42m a year ago. At the root of its problem sits the low wholesale power prices that were ushered in by the competitive trading arrangements for electricity in the UK. The competition exposed the overcapacity within the industry and has left British Energy’s high cost reactors producing at a loss.
Other UK power producers have complained that they too were suffering from the low price scenario and that the government assistance represented unfair competition. AES, the US owner of Drax, Britain’s largest power plant, are challenging the bailout in the EU. European Commission clearance of the rescue on competition grounds has yet to be given. British Energy said it did not expect a decision from the commission until at least the summer of 2004.