British Energy

A rescue package, in the form of emergency loan guarantees worth about 450 million pound, is imminent and could be announced to the market as early as today. The deal will allow British Energy continue operating safely but may not be sufficient for the company’s shares. British Energy told ministers last week it needed a cash injection of at least 280 million pound to enable it to refinance borrowings due to be replaced next year. This is 100 million pound more than the company had previously said it needed. The figure was increased in the expectations that wholesale electricity prices are likely to remain depressed for longer than forecast. British Energy, which loses about 4 pound for every megawatt hour of electricity it sells, has been severely hit by plunging wholesale electricity prices, but credit rating agencies and City analysts were told only three weeks ago that the company could meet its financial commitments. The group now says it did not have the Accenture report when it gave those reassurances. At that point the company was also confident of renegotiating reprocessing contracts with British Nuclear Fuels. In the event BNFL offered a deal worth 70 million pound instead of the 150 million pound British Energy wanted. Since suspending its shares and making public its appeal for government help, British Energy’s credit rating has been cut to junk status.


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