(575.5452) WISE Amsterdam - BE's financial troubles when prices in its U.K. market fell below the cost of production from its U.K. power stations, all but one of which are nuclear (see WISE/NIRS Nuclear Monitor 572.5432, "Will the UK government bail out British Energy?") BE's share price crashed, and a liquidity crisis loomed.
The UK government stepped in with a 410-million-pound (US$640 million) loan until 27 September (see WISE/NIRS Nuclear Monitor 573, "In Brief"). The loan was then renewed and increased to 650 million pounds (US$1 billion) (see WISE/NIRS Nuclear Monitor 574, "In Brief").
Amergen
Its U.S. joint venture Amergen (shared 50/50 with Exelon) bought up old reactors very cheaply, and so can still make money from investing in U.S. nuclear power - unlike some utilities (see "Taxpayer dollars for new U.S. reactors" in this WISE/NIRS Nuclear Monitor).
Shortly before the UK government loan was renewed, BE put Amergen up for sale, with bidders thought to include Constellation, Entergy and Florida Power & Light. Any sale by BE has to be recommended by Exelon, and there has been speculation that if the price is suitable, Exelon could step in and buy the 50 percent stake that it does not yet own. Amergen owns three reactors: Clinton, Oyster Creek and Three Mile Island-1.
| ILLEGAL AID FOR EDF On 16 October, the European Commission ordered Electricité de France (EdF) to repay 900 million Euros (US$877 million) in unfair state aid. EU Competition Commissioner Mario Monti said that because the French government has guaranteed that EdF will not go bankrupt, EdF has profited from below-market interest rates. The French government, however, has rejected the allegations. State-owned EdF has bought up utilities in many countries, seeking to position itself as a global leader before its home market in France opens fully to outside competition. Forbes.com, 16 October 2002; Newsday.com, 14 October 2002 |
Shortfalls
The falls in stock exchanges worldwide have left BE with another problem. Its employee pension scheme faced a shortfall, which according to the scheme's rules must be covered by the company. This could cost it up to 13 million pounds (US$20 million) in 2003.
An even greater shortfall could be present in the decommissioning fund for its UK reactors. This fund works on a "discounted" basis: its value of 411 million pounds (US$625 million) announced in May 2002 is somehow supposed to grow twelve-fold (!) as share prices increase so that it can ultimately cover decommissioning costs estimated at 5.2 billion pounds (US$7.9 billion). Yet since May, share prices have fallen, not risen, and unless share prices climb rapidly soon, there may be an "exceptional charge" in the interim results on 6 November to make up for the losses.
Ironically, this wholly inadequate decommissioning "provision" gives BE leverage when dealing with the UK government, since they can claim that if British Energy goes bust and the reactors close early, the taxpayer would be left to pay the shortfall. They could then point out that it would cost the taxpayer much less (US$1 billion instead of over US$7 billion) to bail out BE with emergency loans as the UK government has done.
Other, non-nuclear utilities cannot use this argument. For example, Texas-based TXU has withdrawn financial support for its loss-making subsidiary TXU Europe, leaving it with a "junk" credit rating. Although TXU Energi, the UK energy supply business which is part of TXU Europe, would probably also like a UK government loan, there are no signs of this happening as this WISE/NIRS Nuclear Monitor goes to press.
The European Commission is investigating whether the UK government's support for BE creates unfair competition in the European energy market (see WISE/NIRS Nuclear Monitor 574, "In Brief").
Roof protest
Meanwhile, on 14 October, nearly 120 activists entered the site of Sizewell B, BE's newest reactor in Suffolk, UK. They hung up a banner with the words "Boom or Bust?" and seven of the Greenpeace activists stayed overnight on the roof of one of the buildings on the site. The action was in protest against Government plans to build a new generation of nuclear power stations (see WISE/NIRS Nuclear Monitor 564.5384, "UK energy review keeps nuclear option open"). After seeing how easy it was to gain access to the site, Greenpeace also criticized the "pitiful" lack of security at Sizewell B.
Sources:
- Reuters, 25 September and 8 October 2002
- The Independent, 15 October 2002
- Greenpeace UK press release, 14 October 2002
- BBC, 15 October 2002
Contact: WISE Amsterdam
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