UK nuclear rescue to repeal poison pill law-sources
Date: 23-Dec-02
Country: UK
Author: Andrew Callus
The moves shows the British government takes seriously the possibility that the stricken privatised power producer's creditors may reject the refinancing package it has put together.
Trade and Industry Secretary Patricia Hewitt has already said the state would have to take back under its full control the producer of a fifth of the UK's electricity if bondholders, bank lenders and business creditors reject the plan.
British Energy appealed to the government for help in September after power prices fell below its cost of production in the newly deregulated UK power market.
It won a 650-million-pound ($1.04 billion) emergency loan, which under EU rules must be replaced by a permanent restructuring by March 9 next year. Creditors have yet to agree the revamp proposed by the state.
THATCHER "POISON PILL"
Britain's Electricity Act of 1989 was put together by then Prime Minister Margaret Thatcher's Conservative government in the heyday of state sell-offs.
Section 74 of the act, written more than six years before British Energy was privatised and seven years before the current left-of-centre Labour government took power, says any new state investment target set by the government "must be lower than the one it replaces".
The company is at present fully investor-owned, except for a government golden share that can be used to block takeovers.
Political sources say the clause was designed as a "poison pill" against future governments that might try to renationalise the industry.
A spokeswoman for the Department of Trade and Industry confirmed that the draft law to rescue the company was ready for approval by senior ministers, but would not comment on its contents.
The restructuring plan hammered out by the government and the firm requires bondholders to accept about 30 pence in the pound of their original investment, in exchange for a majority stake in the company. It leaves other creditors similarly out of pocket, and existing shareholders sitting on near worthless stock and unlikely to see a dividend for years to come.
For its part, the government has taken on nuclear plant decommissioning liabilities and forced the state-run nuclear fuel firm BNFL to accept a lower priced reprocessing contract from British Energy, at a cost to the taxpayer of 150-200 million pounds a year.
The fiasco has fuelled controversy over the viability of the nuclear industry and added a new name to the list of UK post-privatisation controversies.
A row over high executive pay at privatised British Gas in the mid-1990s and the collapse of Britain's privatised rail network operator Railtrack into administration last year have kept the issue of private sector involvement in public utilities in the headlines.
